Correlation Between Bureau Veritas and American Cannabis

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

By analyzing existing cross correlation between Bureau Veritas SA and American Cannabis, you can compare the effects of market volatilities on Bureau Veritas and American 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 Bureau Veritas with a short position of American Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bureau Veritas and American Cannabis.

Diversification Opportunities for Bureau Veritas and American Cannabis

-0.37

Correlation Coefficient

Bureau Veritas  American Cannabis

Very good diversification

The 3 months correlation between Bureau and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bureau Veritas SA and American Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Cannabis and Bureau Veritas 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 Bureau Veritas SA are associated (or correlated) with American Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Cannabis has no effect on the direction of Bureau Veritas i.e., Bureau Veritas and American Cannabis go up and down completely randomly.

Pair Corralation between Bureau Veritas and American Cannabis

Assuming the 90 days horizon Bureau Veritas SA is expected to generate 0.1 times more return on investment than American Cannabis. However, Bureau Veritas SA is 10.18 times less risky than American Cannabis. It trades about 0.01 of its potential returns per unit of risk. American Cannabis is currently generating about -0.01 per unit of risk. If you would invest  5,919  in Bureau Veritas SA on February 23, 2024 and sell it today you would earn a total of  38.00  from holding Bureau Veritas SA or generate 0.64% return on investment over 90 days.

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

Bureau Veritas SA  vs.  American Cannabis

Bureau Veritas SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bureau Veritas SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Bureau Veritas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Pair Trading with Bureau Veritas and American Cannabis

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

The idea behind Bureau Veritas SA and American 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.