Correlation Between Australis Capital and Aleafia Health

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

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

Diversification Opportunities for Australis Capital and Aleafia Health

-0.03

Correlation Coefficient

Australis Capital  Aleafia Health

Good diversification

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

Pair Corralation between Australis Capital and Aleafia Health

Assuming the 90 days horizon Australis Capital is expected to generate 22.5 times more return on investment than Aleafia Health. However, Australis Capital is 22.5 times more volatile than Aleafia Health. It trades about 0.09 of its potential returns per unit of risk. Aleafia Health is currently generating about -0.05 per unit of risk. 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

Australis Capital  vs.  Aleafia Health

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.

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.

Pair Trading with Australis Capital and Aleafia Health

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

The idea behind Australis Capital and Aleafia Health 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.