Correlation Between Verano Holdings and BZAM

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

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

Diversification Opportunities for Verano Holdings and BZAM

0.47

Correlation Coefficient

Verano Holdings  BZAM

Very weak diversification

The 3 months correlation between Verano and BZAM is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Verano Holdings Corp and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM and Verano Holdings 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 Verano Holdings Corp are associated (or correlated) with BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Verano Holdings i.e., Verano Holdings and BZAM go up and down completely randomly.

Pair Corralation between Verano Holdings and BZAM

Assuming the 90 days horizon Verano Holdings Corp is expected to under-perform the BZAM. But the otc stock apears to be less risky and, when comparing its historical volatility, Verano Holdings Corp is 15.26 times less risky than BZAM. The otc stock trades about -0.05 of its potential returns per unit of risk. The BZAM is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11.00  in BZAM on September 19, 2024 and sell it today you would lose (11.00) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Verano Holdings Corp  vs.  BZAM

Verano Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verano Holdings 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.

BZAM

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Verano Holdings and BZAM

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

The idea behind Verano Holdings Corp and BZAM 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.