Correlation Between Auxly Cannabis and Aleafia Health

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

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

Diversification Opportunities for Auxly Cannabis and Aleafia Health

-0.4

Correlation Coefficient

Auxly Cannabis  Aleafia Health

Very good diversification

The 3 months correlation between Auxly and Aleafia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Auxly Cannabis Group and Aleafia Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aleafia Health and Auxly Cannabis 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 Auxly Cannabis Group 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 Auxly Cannabis i.e., Auxly Cannabis and Aleafia Health go up and down completely randomly.

Pair Corralation between Auxly Cannabis and Aleafia Health

Assuming the 90 days horizon Auxly Cannabis Group is expected to generate 1.97 times more return on investment than Aleafia Health. However, Auxly Cannabis is 1.97 times more volatile than Aleafia Health. It trades about 0.05 of its potential returns per unit of risk. Aleafia Health is currently generating about -0.05 per unit of risk. If you would invest  1.80  in Auxly Cannabis Group on September 29, 2024 and sell it today you would earn a total of  0.80  from holding Auxly Cannabis Group or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.27%
Values	Daily Returns

Auxly Cannabis Group  vs.  Aleafia Health

Auxly Cannabis Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Auxly Cannabis Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Auxly Cannabis reported solid returns over the last few months and may actually be approaching a breakup point.

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 Auxly Cannabis and Aleafia Health

The main advantage of trading using opposite Auxly Cannabis and Aleafia Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auxly Cannabis 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 Auxly Cannabis Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.