Correlation Between Charlottes Web and Curaleaf Holdings

Can any of the company-specific risk be diversified away by investing in both Charlottes Web and Curaleaf 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 Charlottes Web and Curaleaf Holdings 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 Curaleaf Holdings, you can compare the effects of market volatilities on Charlottes Web and Curaleaf 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 Charlottes Web with a short position of Curaleaf Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charlottes Web and Curaleaf Holdings.

Diversification Opportunities for Charlottes Web and Curaleaf Holdings

0.52

Correlation Coefficient

Charlottes Web  Curaleaf Holdings

Very weak diversification

The 3 months correlation between Charlottes and Curaleaf is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Charlottes Web Holdings and Curaleaf Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curaleaf Holdings 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 Curaleaf Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curaleaf Holdings has no effect on the direction of Charlottes Web i.e., Charlottes Web and Curaleaf Holdings go up and down completely randomly.

Pair Corralation between Charlottes Web and Curaleaf Holdings

Assuming the 90 days horizon Charlottes Web Holdings is expected to generate 0.66 times more return on investment than Curaleaf Holdings. However, Charlottes Web Holdings is 1.51 times less risky than Curaleaf Holdings. It trades about -0.04 of its potential returns per unit of risk. Curaleaf Holdings is currently generating about -0.08 per unit of risk. If you would invest  14.00  in Charlottes Web Holdings on September 12, 2024 and sell it today you would lose (2.00) from holding Charlottes Web Holdings or give up 14.29% of portfolio value over 90 days.

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

Charlottes Web Holdings  vs.  Curaleaf Holdings

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 latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Curaleaf Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Curaleaf Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential 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 Curaleaf Holdings

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

The idea behind Charlottes Web Holdings and Curaleaf 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.