Correlation Between Auxly Cannabis and Nextleaf Solutions

Can any of the company-specific risk be diversified away by investing in both Auxly Cannabis 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 Auxly Cannabis and Nextleaf Solutions 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 Nextleaf Solutions, you can compare the effects of market volatilities on Auxly Cannabis 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 Auxly Cannabis with a short position of Nextleaf Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auxly Cannabis and Nextleaf Solutions.

Diversification Opportunities for Auxly Cannabis and Nextleaf Solutions

0.31

Correlation Coefficient

Auxly Cannabis  Nextleaf Solutions

Weak diversification

The 3 months correlation between Auxly and Nextleaf is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Auxly Cannabis Group and Nextleaf Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextleaf Solutions 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 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 Auxly Cannabis i.e., Auxly Cannabis and Nextleaf Solutions go up and down completely randomly.

Pair Corralation between Auxly Cannabis and Nextleaf Solutions

Assuming the 90 days horizon Auxly Cannabis Group is expected to generate 0.95 times more return on investment than Nextleaf Solutions. However, Auxly Cannabis Group is 1.06 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 -0.02 per unit of risk. If you would invest  2.70  in Auxly Cannabis Group on October 8, 2024 and sell it today you would earn a total of  0.60  from holding Auxly Cannabis Group or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Auxly Cannabis Group  vs.  Nextleaf Solutions

Auxly Cannabis Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Auxly Cannabis Group are ranked lower than 6 (%) 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.

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 Auxly Cannabis and Nextleaf Solutions

The main advantage of trading using opposite Auxly Cannabis and Nextleaf Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auxly Cannabis 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 Auxly Cannabis Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.