Correlation Between BZAM and Acreage Holdings

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

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

Diversification Opportunities for BZAM and Acreage Holdings

0.45

Correlation Coefficient

BZAM  Acreage Holdings

Very weak diversification

The 3 months correlation between BZAM and Acreage is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BZAM and Acreage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acreage Holdings and BZAM 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 BZAM are associated (or correlated) with Acreage Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acreage Holdings has no effect on the direction of BZAM i.e., BZAM and Acreage Holdings go up and down completely randomly.

Pair Corralation between BZAM and Acreage Holdings

Assuming the 90 days horizon BZAM is expected to generate 12.72 times more return on investment than Acreage Holdings. However, BZAM is 12.72 times more volatile than Acreage Holdings. It trades about 0.13 of its potential returns per unit of risk. Acreage Holdings is currently generating about 0.01 per unit of risk. If you would invest  1.90  in BZAM on September 19, 2024 and sell it today you would lose (1.90) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

BZAM  vs.  Acreage Holdings

BZAM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Acreage Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acreage Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile fundamental indicators, Acreage Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BZAM and Acreage Holdings

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

The idea behind BZAM and Acreage 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.