Correlation Between Charlottes Web and Medipharm Labs

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

Diversification Opportunities for Charlottes Web and Medipharm Labs

0.52

Correlation Coefficient

Charlottes Web  Medipharm Labs

Very weak diversification

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

Pair Corralation between Charlottes Web and Medipharm Labs

Assuming the 90 days horizon Charlottes Web Holdings is expected to under-perform the Medipharm Labs. In addition to that, Charlottes Web is 1.32 times more volatile than Medipharm Labs Corp. It trades about -0.09 of its total potential returns per unit of risk. Medipharm Labs Corp is currently generating about -0.03 per unit of volatility. If you would invest  5.10  in Medipharm Labs Corp on September 19, 2024 and sell it today you would lose (0.54) from holding Medipharm Labs Corp or give up 10.59% 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.  Medipharm Labs 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 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.

Medipharm Labs Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medipharm Labs Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Charlottes Web and Medipharm Labs

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

The idea behind Charlottes Web Holdings and Medipharm Labs 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.