Correlation Between Emergent Health and Global Hemp

Can any of the company-specific risk be diversified away by investing in both Emergent Health and Global Hemp 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 Emergent Health and Global Hemp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emergent Health Corp and Global Hemp Group, you can compare the effects of market volatilities on Emergent Health and Global Hemp 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 Emergent Health with a short position of Global Hemp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emergent Health and Global Hemp.

Diversification Opportunities for Emergent Health and Global Hemp

0.3

Correlation Coefficient

Emergent Health  Global Hemp

Weak diversification

The 3 months correlation between Emergent and Global is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Health Corp and Global Hemp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hemp Group and Emergent Health 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 Emergent Health Corp are associated (or correlated) with Global Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hemp Group has no effect on the direction of Emergent Health i.e., Emergent Health and Global Hemp go up and down completely randomly.

Pair Corralation between Emergent Health and Global Hemp

Given the investment horizon of 90 days Emergent Health is expected to generate 2.34 times less return on investment than Global Hemp. But when comparing it to its historical volatility, Emergent Health Corp is 3.05 times less risky than Global Hemp. It trades about 0.16 of its potential returns per unit of risk. Global Hemp Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Global Hemp Group on October 1, 2024 and sell it today you would earn a total of  0.00  from holding Global Hemp Group or generate 0.0% return on investment over 90 days.

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

Emergent Health Corp  vs.  Global Hemp Group

Emergent Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emergent Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Emergent Health is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Hemp Group

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Emergent Health and Global Hemp

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

The idea behind Emergent Health Corp and Global Hemp Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.