Correlation Between Global Hemp and THC Therapeutics

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

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

Diversification Opportunities for Global Hemp and THC Therapeutics

0.08

Correlation Coefficient

Global Hemp  THC Therapeutics

Significant diversification

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

Pair Corralation between Global Hemp and THC Therapeutics

Assuming the 90 days horizon Global Hemp is expected to generate 6.03 times less return on investment than THC Therapeutics. But when comparing it to its historical volatility, Global Hemp Group is 5.06 times less risky than THC Therapeutics. It trades about 0.09 of its potential returns per unit of risk. THC Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.30  in THC Therapeutics on September 20, 2024 and sell it today you would lose (0.23) from holding THC Therapeutics or give up 76.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Global Hemp Group  vs.  THC Therapeutics

Global Hemp Group

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Hemp Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Global Hemp reported solid returns over the last few months and may actually be approaching a breakup point.

THC Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in THC Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, THC Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Hemp and THC Therapeutics

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

The idea behind Global Hemp Group and THC Therapeutics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.