Correlation Between CbdMD and Medicine Man

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

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

Diversification Opportunities for CbdMD and Medicine Man

0.09

Correlation Coefficient

CbdMD  Medicine Man

Significant diversification

The 3 months correlation between CbdMD and Medicine is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding cbdMD Inc and Medicine Man Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicine Man Technologies 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 Medicine Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicine Man Technologies has no effect on the direction of CbdMD i.e., CbdMD and Medicine Man go up and down completely randomly.

Pair Corralation between CbdMD and Medicine Man

Given the investment horizon of 90 days cbdMD Inc is expected to under-perform the Medicine Man. But the stock apears to be less risky and, when comparing its historical volatility, cbdMD Inc is 9.21 times less risky than Medicine Man. The stock trades about -0.03 of its potential returns per unit of risk. The Medicine Man Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Medicine Man Technologies on September 3, 2024 and sell it today you would lose (1.00) from holding Medicine Man Technologies or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

cbdMD Inc  vs.  Medicine Man Technologies

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.

Medicine Man Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medicine Man Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Medicine Man showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CbdMD and Medicine Man

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

The idea behind cbdMD Inc and Medicine Man Technologies 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.