Correlation Between CV Sciences and Entourage Health

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

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

Diversification Opportunities for CV Sciences and Entourage Health

0.54

Correlation Coefficient

CV Sciences  Entourage Health

Very weak diversification

The 3 months correlation between CVSI and Entourage is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CV Sciences and Entourage Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entourage Health Corp and CV Sciences 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 CV Sciences are associated (or correlated) with Entourage Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entourage Health Corp has no effect on the direction of CV Sciences i.e., CV Sciences and Entourage Health go up and down completely randomly.

Pair Corralation between CV Sciences and Entourage Health

Given the investment horizon of 90 days CV Sciences is expected to generate 8.2 times less return on investment than Entourage Health. But when comparing it to its historical volatility, CV Sciences is 1.97 times less risky than Entourage Health. It trades about 0.01 of its potential returns per unit of risk. Entourage Health Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.85  in Entourage Health Corp on September 2, 2024 and sell it today you would lose (0.35) from holding Entourage Health Corp or give up 41.18% of portfolio value over 90 days.

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

CV Sciences  vs.  Entourage Health Corp

CV Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CV Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CV Sciences is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Entourage Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Entourage Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Entourage Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CV Sciences and Entourage Health

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

The idea behind CV Sciences and Entourage 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 Commodity Directory module to find actively traded commodities issued by global exchanges.