Correlation Between Charlottes Web and GrowGeneration Corp

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

Diversification Opportunities for Charlottes Web and GrowGeneration Corp

0.03

Correlation Coefficient

Charlottes Web  GrowGeneration Corp

Significant diversification

The 3 months correlation between Charlottes and GrowGeneration is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Charlottes Web Holdings and GrowGeneration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrowGeneration Corp 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 GrowGeneration Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrowGeneration Corp has no effect on the direction of Charlottes Web i.e., Charlottes Web and GrowGeneration Corp go up and down completely randomly.

Pair Corralation between Charlottes Web and GrowGeneration Corp

Assuming the 90 days horizon Charlottes Web Holdings is expected to under-perform the GrowGeneration Corp. In addition to that, Charlottes Web is 1.27 times more volatile than GrowGeneration Corp. It trades about -0.02 of its total potential returns per unit of risk. GrowGeneration Corp is currently generating about 0.05 per unit of volatility. If you would invest  191.00  in GrowGeneration Corp on September 4, 2024 and sell it today you would earn a total of  17.00  from holding GrowGeneration Corp or generate 8.9% return on investment over 90 days.

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

Charlottes Web Holdings  vs.  GrowGeneration Corp

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 weak 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.

GrowGeneration Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GrowGeneration Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, GrowGeneration Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charlottes Web and GrowGeneration Corp

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

The idea behind Charlottes Web Holdings and GrowGeneration 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.