Correlation Between Cannara Biotech and Simply Better

Can any of the company-specific risk be diversified away by investing in both Cannara Biotech and Simply Better 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 Cannara Biotech and Simply Better into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cannara Biotech and Simply Better Brands, you can compare the effects of market volatilities on Cannara Biotech and Simply Better 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 Cannara Biotech with a short position of Simply Better. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cannara Biotech and Simply Better.

Diversification Opportunities for Cannara Biotech and Simply Better

0.58

Correlation Coefficient

Cannara Biotech  Simply Better

Very weak diversification

The 3 months correlation between Cannara and Simply is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cannara Biotech and Simply Better Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Better Brands and Cannara Biotech 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 Cannara Biotech are associated (or correlated) with Simply Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Better Brands has no effect on the direction of Cannara Biotech i.e., Cannara Biotech and Simply Better go up and down completely randomly.

Pair Corralation between Cannara Biotech and Simply Better

Assuming the 90 days trading horizon Cannara Biotech is expected to generate 2.51 times less return on investment than Simply Better. In addition to that, Cannara Biotech is 1.29 times more volatile than Simply Better Brands. It trades about 0.07 of its total potential returns per unit of risk. Simply Better Brands is currently generating about 0.22 per unit of volatility. If you would invest  58.00  in Simply Better Brands on October 6, 2024 and sell it today you would earn a total of  51.00  from holding Simply Better Brands or generate 87.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Cannara Biotech  vs.  Simply Better Brands

Cannara Biotech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cannara Biotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cannara Biotech showed solid returns over the last few months and may actually be approaching a breakup point.

Simply Better Brands

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Better Brands are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Simply Better showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cannara Biotech and Simply Better

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

The idea behind Cannara Biotech and Simply Better Brands 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.