Correlation Between CEA Industries and Urban Gro

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

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

Diversification Opportunities for CEA Industries and Urban Gro

-0.09

Correlation Coefficient

CEA Industries  Urban Gro

Good diversification

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

Pair Corralation between CEA Industries and Urban Gro

Given the investment horizon of 90 days CEA Industries is expected to generate 0.49 times more return on investment than Urban Gro. However, CEA Industries is 2.05 times less risky than Urban Gro. It trades about -0.19 of its potential returns per unit of risk. Urban Gro is currently generating about -0.16 per unit of risk. If you would invest  680.00  in CEA Industries on September 2, 2024 and sell it today you would lose (80.00) from holding CEA Industries or give up 11.76% of portfolio value over 90 days.

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

CEA Industries  vs.  Urban Gro

CEA Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Urban Gro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Gro are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Urban Gro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEA Industries and Urban Gro

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

The idea behind CEA Industries and Urban Gro 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.