Correlation Between Bank Central and Trulieve Cannabis

Can any of the company-specific risk be diversified away by investing in both Bank Central and Trulieve Cannabis 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 Bank Central and Trulieve Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bank Central and Trulieve Cannabis

0.81

Correlation Coefficient

Bank Central  Trulieve Cannabis

Very poor diversification

The 3 months correlation between Bank and Trulieve is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Trulieve Cannabis Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trulieve Cannabis Corp and Bank Central 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 Bank Central Asia are associated (or correlated) with Trulieve Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trulieve Cannabis Corp has no effect on the direction of Bank Central i.e., Bank Central and Trulieve Cannabis go up and down completely randomly.

Pair Corralation between Bank Central and Trulieve Cannabis

Assuming the 90 days horizon Bank Central is expected to generate 1.59 times less return on investment than Trulieve Cannabis. But when comparing it to its historical volatility, Bank Central Asia is 4.08 times less risky than Trulieve Cannabis. It trades about 0.03 of its potential returns per unit of risk. Trulieve Cannabis Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  898.00  in Trulieve Cannabis Corp on September 4, 2024 and sell it today you would lose (295.00) from holding Trulieve Cannabis Corp or give up 32.85% of portfolio value over 90 days.

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

Bank Central Asia  vs.  Trulieve Cannabis Corp

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bank Central is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Trulieve Cannabis Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trulieve Cannabis Corp 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank Central and Trulieve Cannabis

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

The idea behind Bank Central Asia and Trulieve Cannabis 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.