Correlation Between Aleafia Health and Australis Capital

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

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

Diversification Opportunities for Aleafia Health and Australis Capital

-0.03

Correlation Coefficient

Aleafia Health  Australis Capital

Good diversification

The 3 months correlation between Aleafia and Australis is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aleafia Health and Australis Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australis Capital and Aleafia Health 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 Aleafia Health are associated (or correlated) with Australis Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australis Capital has no effect on the direction of Aleafia Health i.e., Aleafia Health and Australis Capital go up and down completely randomly.

Pair Corralation between Aleafia Health and Australis Capital

Assuming the 90 days horizon Aleafia Health is expected to under-perform the Australis Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aleafia Health is 22.5 times less risky than Australis Capital. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Australis Capital is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.40  in Australis Capital on September 29, 2024 and sell it today you would lose (4.39) from holding Australis Capital or give up 99.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.43%
Values	Daily Returns

Aleafia Health  vs.  Australis Capital

Aleafia Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aleafia Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aleafia Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Australis Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australis Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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.

Pair Trading with Aleafia Health and Australis Capital

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

The idea behind Aleafia Health and Australis Capital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.