Correlation Between Aleafia Health and Nextleaf Solutions

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

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

Diversification Opportunities for Aleafia Health and Nextleaf Solutions

0.0

Correlation Coefficient

Aleafia Health  Nextleaf Solutions

Pay attention - limited upside

The 3 months correlation between Aleafia and Nextleaf is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aleafia Health and Nextleaf Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextleaf Solutions 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 Nextleaf Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextleaf Solutions has no effect on the direction of Aleafia Health i.e., Aleafia Health and Nextleaf Solutions go up and down completely randomly.

Pair Corralation between Aleafia Health and Nextleaf Solutions

Assuming the 90 days horizon Aleafia Health is expected to generate 87.47 times less return on investment than Nextleaf Solutions. But when comparing it to its historical volatility, Aleafia Health is 149.06 times less risky than Nextleaf Solutions. It trades about 0.08 of its potential returns per unit of risk. Nextleaf Solutions is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.96  in Nextleaf Solutions on October 8, 2024 and sell it today you would earn a total of  0.94  from holding Nextleaf Solutions or generate 23.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	60.9%
Values	Daily Returns

Aleafia Health  vs.  Nextleaf Solutions

Aleafia Health

Risk-Adjusted Performance

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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.

Nextleaf Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextleaf Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aleafia Health and Nextleaf Solutions

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

The idea behind Aleafia Health and Nextleaf Solutions 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.