Correlation Between Stem Holdings and Pure Harvest

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

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

Diversification Opportunities for Stem Holdings and Pure Harvest

-0.38

Correlation Coefficient

Stem Holdings  Pure Harvest

Very good diversification

The 3 months correlation between Stem and Pure is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stem Holdings and Pure Harvest Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Harvest Cannabis 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 Pure Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Harvest Cannabis has no effect on the direction of Stem Holdings i.e., Stem Holdings and Pure Harvest go up and down completely randomly.

Pair Corralation between Stem Holdings and Pure Harvest

Given the investment horizon of 90 days Stem Holdings is expected to generate 2.14 times more return on investment than Pure Harvest. However, Stem Holdings is 2.14 times more volatile than Pure Harvest Cannabis. It trades about 0.08 of its potential returns per unit of risk. Pure Harvest Cannabis is currently generating about 0.11 per unit of risk. If you would invest  0.50  in Stem Holdings on October 9, 2024 and sell it today you would lose (0.50) from holding Stem Holdings or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Stem Holdings  vs.  Pure Harvest Cannabis

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.

Pure Harvest Cannabis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Harvest Cannabis are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Pure Harvest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stem Holdings and Pure Harvest

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

The idea behind Stem Holdings and Pure Harvest Cannabis 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.