Correlation Between CbdMD and Anavex Life

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

By analyzing existing cross correlation between cbdMD Inc and Anavex Life Sciences, you can compare the effects of market volatilities on CbdMD and Anavex Life 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 CbdMD with a short position of Anavex Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of CbdMD and Anavex Life.

Diversification Opportunities for CbdMD and Anavex Life

-0.3

Correlation Coefficient

CbdMD  Anavex Life

Very good diversification

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

Pair Corralation between CbdMD and Anavex Life

Given the investment horizon of 90 days cbdMD Inc is expected to under-perform the Anavex Life. But the stock apears to be less risky and, when comparing its historical volatility, cbdMD Inc is 1.23 times less risky than Anavex Life. The stock trades about -0.34 of its potential returns per unit of risk. The Anavex Life Sciences is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  384.00  in Anavex Life Sciences on March 7, 2024 and sell it today you would earn a total of  28.00  from holding Anavex Life Sciences or generate 7.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

cbdMD Inc  vs.  Anavex Life Sciences

cbdMD Inc

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in cbdMD Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, CbdMD may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Anavex Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anavex Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with CbdMD and Anavex Life

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

The idea behind cbdMD Inc and Anavex Life Sciences 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.