Correlation Between Earth Science and Pure Harvest

Can any of the company-specific risk be diversified away by investing in both Earth Science and Pure Harvest 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 Earth Science and Pure Harvest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Earth Science Tech and Pure Harvest Cannabis, you can compare the effects of market volatilities on Earth Science and Pure Harvest 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 Earth Science with a short position of Pure Harvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earth Science and Pure Harvest.

Diversification Opportunities for Earth Science and Pure Harvest

0.08

Correlation Coefficient

Earth Science  Pure Harvest

Significant diversification

The 3 months correlation between Earth and Pure is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Earth Science Tech and Pure Harvest Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Harvest Cannabis and Earth Science 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 Earth Science Tech are associated (or correlated) with Pure Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Harvest Cannabis has no effect on the direction of Earth Science i.e., Earth Science and Pure Harvest go up and down completely randomly.

Pair Corralation between Earth Science and Pure Harvest

Given the investment horizon of 90 days Earth Science Tech is expected to under-perform the Pure Harvest. But the pink sheet apears to be less risky and, when comparing its historical volatility, Earth Science Tech is 2.65 times less risky than Pure Harvest. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Pure Harvest Cannabis is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Pure Harvest Cannabis on September 4, 2024 and sell it today you would earn a total of  0.10  from holding Pure Harvest Cannabis or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Earth Science Tech  vs.  Pure Harvest Cannabis

Earth Science Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Science Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Earth Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pure Harvest Cannabis

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Harvest Cannabis are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Pure Harvest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Earth Science and Pure Harvest

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

The idea behind Earth Science Tech and Pure Harvest Cannabis 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.