Correlation Between Clever Leaves and Stem Holdings

Can any of the company-specific risk be diversified away by investing in both Clever Leaves and Stem Holdings 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 Clever Leaves and Stem Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Clever Leaves and Stem Holdings

0.32

Correlation Coefficient

Clever Leaves  Stem Holdings

Weak diversification

The 3 months correlation between Clever and Stem is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Clever Leaves Holdings and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and Clever Leaves 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 Clever Leaves Holdings are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of Clever Leaves i.e., Clever Leaves and Stem Holdings go up and down completely randomly.

Pair Corralation between Clever Leaves and Stem Holdings

Given the investment horizon of 90 days Clever Leaves Holdings is expected to generate 1.36 times more return on investment than Stem Holdings. However, Clever Leaves is 1.36 times more volatile than Stem Holdings. It trades about 0.18 of its potential returns per unit of risk. Stem Holdings is currently generating about 0.13 per unit of risk. If you would invest  2.50  in Clever Leaves Holdings on December 28, 2024 and sell it today you would lose (2.48) from holding Clever Leaves Holdings or give up 99.2% of portfolio value over 90 days.

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

Clever Leaves Holdings  vs.  Stem Holdings

Clever Leaves Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clever Leaves Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Clever Leaves reported solid returns over the last few months and may actually be approaching a breakup point.

Stem Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Stem Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clever Leaves and Stem Holdings

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

The idea behind Clever Leaves Holdings and Stem Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.