Correlation Between Cannara Biotech and Benchmark Botanics

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

By analyzing existing cross correlation between Cannara Biotech and Benchmark Botanics, you can compare the effects of market volatilities on Cannara Biotech and Benchmark Botanics 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 Benchmark Botanics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cannara Biotech and Benchmark Botanics.

Diversification Opportunities for Cannara Biotech and Benchmark Botanics

-0.32

Correlation Coefficient

Cannara Biotech  Benchmark Botanics

Very good diversification

The 3 months correlation between Cannara and Benchmark is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cannara Biotech and Benchmark Botanics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Botanics 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 Benchmark Botanics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Botanics has no effect on the direction of Cannara Biotech i.e., Cannara Biotech and Benchmark Botanics go up and down completely randomly.

Pair Corralation between Cannara Biotech and Benchmark Botanics

Assuming the 90 days horizon Cannara Biotech is expected to generate 4.06 times less return on investment than Benchmark Botanics. But when comparing it to its historical volatility, Cannara Biotech is 6.01 times less risky than Benchmark Botanics. It trades about 0.04 of its potential returns per unit of risk. Benchmark Botanics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.10  in Benchmark Botanics on December 2, 2024 and sell it today you would lose (1.10) from holding Benchmark Botanics or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Cannara Biotech  vs.  Benchmark Botanics

Cannara Biotech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cannara Biotech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Cannara Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

Benchmark Botanics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Botanics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cannara Biotech and Benchmark Botanics

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

The idea behind Cannara Biotech and Benchmark Botanics 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.