Correlation Between Charlottes Web and Trulieve Cannabis

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

Diversification Opportunities for Charlottes Web and Trulieve Cannabis

0.48

Correlation Coefficient

Charlottes Web  Trulieve Cannabis

Very weak diversification

The 3 months correlation between Charlottes and Trulieve is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Charlottes Web Holdings and Trulieve Cannabis Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trulieve Cannabis 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 Trulieve Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trulieve Cannabis Corp has no effect on the direction of Charlottes Web i.e., Charlottes Web and Trulieve Cannabis go up and down completely randomly.

Pair Corralation between Charlottes Web and Trulieve Cannabis

Assuming the 90 days horizon Charlottes Web Holdings is expected to generate 0.62 times more return on investment than Trulieve Cannabis. However, Charlottes Web Holdings is 1.61 times less risky than Trulieve Cannabis. It trades about -0.04 of its potential returns per unit of risk. Trulieve Cannabis Corp is currently generating about -0.12 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.  Trulieve Cannabis 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 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.

Trulieve Cannabis Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trulieve Cannabis Corp 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 Trulieve Cannabis

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

The idea behind Charlottes Web Holdings and Trulieve Cannabis 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.