Correlation Between Stem Holdings and BC Craft

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

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

Diversification Opportunities for Stem Holdings and BC Craft

0.43

Correlation Coefficient

Stem Holdings  BC Craft

Very weak diversification

The 3 months correlation between Stem and CRFTF is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Stem Holdings and BC Craft Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Craft Supply and Stem Holdings 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 Stem Holdings are associated (or correlated) with BC Craft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Craft Supply has no effect on the direction of Stem Holdings i.e., Stem Holdings and BC Craft go up and down completely randomly.

Pair Corralation between Stem Holdings and BC Craft

Given the investment horizon of 90 days Stem Holdings is expected to under-perform the BC Craft. But the otc stock apears to be less risky and, when comparing its historical volatility, Stem Holdings is 2.21 times less risky than BC Craft. The otc stock trades about -0.1 of its potential returns per unit of risk. The BC Craft Supply is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2.65  in BC Craft Supply on October 9, 2024 and sell it today you would lose (2.64) from holding BC Craft Supply or give up 99.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.93%
Values	Daily Returns

Stem Holdings  vs.  BC Craft Supply

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Holdings 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 primary indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

BC Craft Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BC Craft Supply 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Stem Holdings and BC Craft

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

The idea behind Stem Holdings and BC Craft Supply 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.