Correlation Between CbdMD and Star Equity

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

By analyzing existing cross correlation between cbdMD Inc and Star Equity Holdings, you can compare the effects of market volatilities on CbdMD and Star Equity 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 CbdMD with a short position of Star Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of CbdMD and Star Equity.

Diversification Opportunities for CbdMD and Star Equity

0.48

Correlation Coefficient

CbdMD  Star Equity

Very weak diversification

The 3 months correlation between CbdMD and Star is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding cbdMD Inc and Star Equity Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Equity Holdings and CbdMD 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 cbdMD Inc are associated (or correlated) with Star Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Equity Holdings has no effect on the direction of CbdMD i.e., CbdMD and Star Equity go up and down completely randomly.

Pair Corralation between CbdMD and Star Equity

Assuming the 90 days trading horizon cbdMD Inc is expected to generate 4.15 times more return on investment than Star Equity. However, CbdMD is 4.15 times more volatile than Star Equity Holdings. It trades about 0.17 of its potential returns per unit of risk. Star Equity Holdings is currently generating about 0.09 per unit of risk. If you would invest  76.00  in cbdMD Inc on December 29, 2024 and sell it today you would earn a total of  63.00  from holding cbdMD Inc or generate 82.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

cbdMD Inc  vs.  Star Equity Holdings

cbdMD Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in cbdMD Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, CbdMD sustained solid returns over the last few months and may actually be approaching a breakup point.

Star Equity Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Star Equity Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Star Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CbdMD and Star Equity

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

The idea behind cbdMD Inc and Star Equity Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.