Correlation Between Numinus Wellness and CareRx Corp

Can any of the company-specific risk be diversified away by investing in both Numinus Wellness and CareRx Corp 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 Numinus Wellness and CareRx Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Numinus Wellness and CareRx Corp, you can compare the effects of market volatilities on Numinus Wellness and CareRx Corp 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 Numinus Wellness with a short position of CareRx Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Numinus Wellness and CareRx Corp.

Diversification Opportunities for Numinus Wellness and CareRx Corp

0.69

Correlation Coefficient

Numinus Wellness  CareRx Corp

Poor diversification

The 3 months correlation between Numinus and CareRx is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Numinus Wellness and CareRx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx Corp and Numinus Wellness 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 Numinus Wellness are associated (or correlated) with CareRx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx Corp has no effect on the direction of Numinus Wellness i.e., Numinus Wellness and CareRx Corp go up and down completely randomly.

Pair Corralation between Numinus Wellness and CareRx Corp

Assuming the 90 days trading horizon Numinus Wellness is expected to generate 3.13 times more return on investment than CareRx Corp. However, Numinus Wellness is 3.13 times more volatile than CareRx Corp. It trades about 0.11 of its potential returns per unit of risk. CareRx Corp is currently generating about 0.22 per unit of risk. If you would invest  3.50  in Numinus Wellness on December 30, 2024 and sell it today you would earn a total of  1.50  from holding Numinus Wellness or generate 42.86% return on investment over 90 days.

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

Numinus Wellness  vs.  CareRx Corp

Numinus Wellness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Numinus Wellness are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Numinus Wellness displayed solid returns over the last few months and may actually be approaching a breakup point.

CareRx Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRx Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CareRx Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Numinus Wellness and CareRx Corp

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

The idea behind Numinus Wellness and CareRx Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.