Correlation Between INC Research and CbdMD

Can any of the company-specific risk be diversified away by investing in both INC Research and CbdMD 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 CbdMD 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 cbdMD Inc, you can compare the effects of market volatilities on INC Research and CbdMD 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 CbdMD. Check out your portfolio center. Please also check ongoing floating volatility patterns of INC Research and CbdMD.

Diversification Opportunities for INC Research and CbdMD

0.39

Correlation Coefficient

INC Research  CbdMD

Weak diversification

The 3 months correlation between INC and CbdMD is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and cbdMD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cbdMD Inc 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 CbdMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cbdMD Inc has no effect on the direction of INC Research i.e., INC Research and CbdMD go up and down completely randomly.

Pair Corralation between INC Research and CbdMD

Given the investment horizon of 90 days INC Research is expected to generate 2.22 times less return on investment than CbdMD. But when comparing it to its historical volatility, INC Research Holdings is 1.0 times less risky than CbdMD. It trades about 0.12 of its potential returns per unit of risk. cbdMD Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  71.00  in cbdMD Inc on October 5, 2024 and sell it today you would earn a total of  23.00  from holding cbdMD Inc or generate 32.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

INC Research Holdings  vs.  cbdMD Inc

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 relatively invariable fundamental indicators, INC Research is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

cbdMD Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in cbdMD Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, CbdMD sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INC Research and CbdMD

The main advantage of trading using opposite INC Research and CbdMD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INC Research position performs unexpectedly, CbdMD 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 CbdMD will offset losses from the drop in CbdMD's long position.

The idea behind INC Research Holdings and cbdMD Inc 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.