Correlation Between Stem Holdings and C21 Investments

Can any of the company-specific risk be diversified away by investing in both Stem Holdings and C21 Investments 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 C21 Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stem Holdings and C21 Investments, you can compare the effects of market volatilities on Stem Holdings and C21 Investments 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 C21 Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem Holdings and C21 Investments.

Diversification Opportunities for Stem Holdings and C21 Investments

0.52

Correlation Coefficient

Stem Holdings  C21 Investments

Very weak diversification

The 3 months correlation between Stem and C21 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Stem Holdings and C21 Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C21 Investments 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 C21 Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C21 Investments has no effect on the direction of Stem Holdings i.e., Stem Holdings and C21 Investments go up and down completely randomly.

Pair Corralation between Stem Holdings and C21 Investments

Given the investment horizon of 90 days Stem Holdings is expected to under-perform the C21 Investments. In addition to that, Stem Holdings is 1.97 times more volatile than C21 Investments. It trades about -0.13 of its total potential returns per unit of risk. C21 Investments is currently generating about -0.05 per unit of volatility. If you would invest  19.00  in C21 Investments on December 19, 2024 and sell it today you would lose (5.00) from holding C21 Investments or give up 26.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Stem Holdings  vs.  C21 Investments

Stem Holdings

Risk-Adjusted Performance

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 April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

C21 Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days C21 Investments 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 forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Stem Holdings and C21 Investments

The main advantage of trading using opposite Stem Holdings and C21 Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem Holdings position performs unexpectedly, C21 Investments 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 C21 Investments will offset losses from the drop in C21 Investments' long position.

The idea behind Stem Holdings and C21 Investments 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.