Correlation Between INC Research and Charlottes Web

Can any of the company-specific risk be diversified away by investing in both INC Research and Charlottes Web at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining INC Research and Charlottes Web into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INC Research Holdings and Charlottes Web Holdings, you can compare the effects of market volatilities on INC Research and Charlottes Web and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in INC Research with a short position of Charlottes Web. Check out your portfolio center. Please also check ongoing floating volatility patterns of INC Research and Charlottes Web.

Diversification Opportunities for INC Research and Charlottes Web

0.44

Correlation Coefficient

INC Research  Charlottes Web

Very weak diversification

The 3 months correlation between INC and Charlottes is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Charlottes Web Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charlottes Web Holdings and INC Research is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on INC Research Holdings are associated (or correlated) with Charlottes Web. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charlottes Web Holdings has no effect on the direction of INC Research i.e., INC Research and Charlottes Web go up and down completely randomly.

Pair Corralation between INC Research and Charlottes Web

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Charlottes Web. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 1.02 times less risky than Charlottes Web. The stock trades about -0.14 of its potential returns per unit of risk. The Charlottes Web Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Charlottes Web Holdings on September 2, 2024 and sell it today you would lose (2.00) from holding Charlottes Web Holdings or give up 13.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

INC Research Holdings  vs.  Charlottes Web Holdings

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Charlottes Web Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charlottes Web Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INC Research and Charlottes Web

The main advantage of trading using opposite INC Research and Charlottes Web positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INC Research position performs unexpectedly, Charlottes Web can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Charlottes Web will offset losses from the drop in Charlottes Web's long position.

The idea behind INC Research Holdings and Charlottes Web Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.