Correlation Between Charlottes Web and Aequus Pharmaceuticals

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

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

Diversification Opportunities for Charlottes Web and Aequus Pharmaceuticals

0.5

Correlation Coefficient

Charlottes Web  Aequus Pharmaceuticals

Very weak diversification

The 3 months correlation between Charlottes and Aequus is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Charlottes Web Holdings and Aequus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aequus Pharmaceuticals and Charlottes Web 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 Charlottes Web Holdings are associated (or correlated) with Aequus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aequus Pharmaceuticals has no effect on the direction of Charlottes Web i.e., Charlottes Web and Aequus Pharmaceuticals go up and down completely randomly.

Pair Corralation between Charlottes Web and Aequus Pharmaceuticals

Assuming the 90 days horizon Charlottes Web Holdings is expected to generate 0.46 times more return on investment than Aequus Pharmaceuticals. However, Charlottes Web Holdings is 2.19 times less risky than Aequus Pharmaceuticals. It trades about -0.06 of its potential returns per unit of risk. Aequus Pharmaceuticals is currently generating about -0.15 per unit of risk. If you would invest  14.00  in Charlottes Web Holdings on September 20, 2024 and sell it today you would lose (3.00) from holding Charlottes Web Holdings or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Charlottes Web Holdings  vs.  Aequus Pharmaceuticals

Charlottes Web Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charlottes Web Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aequus Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aequus Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Charlottes Web and Aequus Pharmaceuticals

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

The idea behind Charlottes Web Holdings and Aequus Pharmaceuticals 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 Global Correlations module to find global opportunities by holding instruments from different markets.