Correlation Between THC Therapeutics and Brainsway

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

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

Diversification Opportunities for THC Therapeutics and Brainsway

-0.12

Correlation Coefficient

THC Therapeutics  Brainsway

Good diversification

The 3 months correlation between THC and Brainsway is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding THC Therapeutics and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway and THC Therapeutics 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 THC Therapeutics are associated (or correlated) with Brainsway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainsway has no effect on the direction of THC Therapeutics i.e., THC Therapeutics and Brainsway go up and down completely randomly.

Pair Corralation between THC Therapeutics and Brainsway

Given the investment horizon of 90 days THC Therapeutics is expected to generate 9.26 times more return on investment than Brainsway. However, THC Therapeutics is 9.26 times more volatile than Brainsway. It trades about 0.07 of its potential returns per unit of risk. Brainsway is currently generating about 0.02 per unit of risk. If you would invest  0.09  in THC Therapeutics on December 29, 2024 and sell it today you would lose (0.06) from holding THC Therapeutics or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

THC Therapeutics  vs.  Brainsway

THC Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THC Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, THC Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Brainsway

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Brainsway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with THC Therapeutics and Brainsway

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

The idea behind THC Therapeutics and Brainsway 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.