Correlation Between 22nd Century and Better Choice

Can any of the company-specific risk be diversified away by investing in both 22nd Century and Better Choice 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 22nd Century and Better Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 22nd Century Group and Better Choice, you can compare the effects of market volatilities on 22nd Century and Better Choice 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 22nd Century with a short position of Better Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of 22nd Century and Better Choice.

Diversification Opportunities for 22nd Century and Better Choice

-0.58

Correlation Coefficient

22nd Century  Better Choice

Excellent diversification

The 3 months correlation between 22nd and Better is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding 22nd Century Group and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice and 22nd Century 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 22nd Century Group are associated (or correlated) with Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of 22nd Century i.e., 22nd Century and Better Choice go up and down completely randomly.

Pair Corralation between 22nd Century and Better Choice

Given the investment horizon of 90 days 22nd Century Group is expected to generate 6.96 times more return on investment than Better Choice. However, 22nd Century is 6.96 times more volatile than Better Choice. It trades about 0.05 of its potential returns per unit of risk. Better Choice is currently generating about -0.03 per unit of risk. If you would invest  2,484  in 22nd Century Group on October 23, 2024 and sell it today you would lose (1,974) from holding 22nd Century Group or give up 79.47% of portfolio value over 90 days.

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

22nd Century Group  vs.  Better Choice

22nd Century Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 22nd Century Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward 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.

Better Choice

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Better Choice are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Better Choice reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 22nd Century and Better Choice

The main advantage of trading using opposite 22nd Century and Better Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 22nd Century position performs unexpectedly, Better Choice 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 Better Choice will offset losses from the drop in Better Choice's long position.

The idea behind 22nd Century Group and Better Choice 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.