Correlation Between Real Brands and Global Hemp

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

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

Diversification Opportunities for Real Brands and Global Hemp

0.28

Correlation Coefficient

Real Brands  Global Hemp

Modest diversification

The 3 months correlation between Real and Global is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Real Brands and Global Hemp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hemp Group and Real Brands 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 Real Brands are associated (or correlated) with Global Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hemp Group has no effect on the direction of Real Brands i.e., Real Brands and Global Hemp go up and down completely randomly.

Pair Corralation between Real Brands and Global Hemp

Given the investment horizon of 90 days Real Brands is expected to generate 3.03 times less return on investment than Global Hemp. But when comparing it to its historical volatility, Real Brands is 1.71 times less risky than Global Hemp. It trades about 0.07 of its potential returns per unit of risk. Global Hemp Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.80  in Global Hemp Group on September 2, 2024 and sell it today you would lose (0.80) from holding Global Hemp Group or give up 44.44% of portfolio value over 90 days.

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

Real Brands  vs.  Global Hemp Group

Real Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Real Brands is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Hemp Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Hemp Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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 Real Brands and Global Hemp

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

The idea behind Real Brands and Global Hemp Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.