Correlation Between CbdMD and Emergent Health

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

By analyzing existing cross correlation between cbdMD Inc and Emergent Health Corp, you can compare the effects of market volatilities on CbdMD and Emergent Health 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 Emergent Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CbdMD and Emergent Health.

Diversification Opportunities for CbdMD and Emergent Health

0.46

Correlation Coefficient

CbdMD  Emergent Health

Very weak diversification

The 3 months correlation between CbdMD and Emergent is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding cbdMD Inc and Emergent Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Health Corp 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 Emergent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Health Corp has no effect on the direction of CbdMD i.e., CbdMD and Emergent Health go up and down completely randomly.

Pair Corralation between CbdMD and Emergent Health

Given the investment horizon of 90 days cbdMD Inc is expected to under-perform the Emergent Health. But the stock apears to be less risky and, when comparing its historical volatility, cbdMD Inc is 2.43 times less risky than Emergent Health. The stock trades about -0.04 of its potential returns per unit of risk. The Emergent Health Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.15  in Emergent Health Corp on August 31, 2024 and sell it today you would lose (0.05) from holding Emergent Health Corp or give up 33.33% of portfolio value over 90 days.

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

cbdMD Inc  vs.  Emergent Health Corp

cbdMD Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days cbdMD Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Emergent Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emergent Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CbdMD and Emergent Health

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

The idea behind cbdMD Inc and Emergent Health Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.