Correlation Between Painreform and Stem Holdings

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

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

Diversification Opportunities for Painreform and Stem Holdings

0.8

Correlation Coefficient

Painreform  Stem Holdings

Very poor diversification

The 3 months correlation between Painreform and Stem is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Painreform and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and Painreform 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 Painreform are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of Painreform i.e., Painreform and Stem Holdings go up and down completely randomly.

Pair Corralation between Painreform and Stem Holdings

Given the investment horizon of 90 days Painreform is expected to under-perform the Stem Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Painreform is 20.09 times less risky than Stem Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Stem Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Stem Holdings on December 29, 2024 and sell it today you would earn a total of  0.01  from holding Stem Holdings or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

Painreform  vs.  Stem Holdings

Painreform

Risk-Adjusted Performance

Very Weak

Over the last 90 days Painreform has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Stem Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Stem Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Painreform and Stem Holdings

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

The idea behind Painreform and Stem Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.