Correlation Between CbdMD and Edesa Biotech

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

By analyzing existing cross correlation between cbdMD Inc and Edesa Biotech, you can compare the effects of market volatilities on CbdMD and Edesa Biotech 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 Edesa Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CbdMD and Edesa Biotech.

Diversification Opportunities for CbdMD and Edesa Biotech

-0.39

Correlation Coefficient

CbdMD  Edesa Biotech

Very good diversification

The 3 months correlation between CbdMD and Edesa is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding cbdMD Inc and Edesa Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edesa Biotech 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 Edesa Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edesa Biotech has no effect on the direction of CbdMD i.e., CbdMD and Edesa Biotech go up and down completely randomly.

Pair Corralation between CbdMD and Edesa Biotech

Given the investment horizon of 90 days cbdMD Inc is expected to under-perform the Edesa Biotech. But the stock apears to be less risky and, when comparing its historical volatility, cbdMD Inc is 1.01 times less risky than Edesa Biotech. The stock trades about -0.06 of its potential returns per unit of risk. The Edesa Biotech is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,386  in Edesa Biotech on February 26, 2024 and sell it today you would lose (939.00) from holding Edesa Biotech or give up 67.75% of portfolio value over 90 days.

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

cbdMD Inc  vs.  Edesa Biotech

cbdMD Inc

Risk-Adjusted Performance

1 of 100

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 June 2024.

Edesa Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edesa Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CbdMD and Edesa Biotech

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

The idea behind cbdMD Inc and Edesa Biotech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.