Correlation Between HempAmericana and Nextleaf Solutions

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

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

Diversification Opportunities for HempAmericana and Nextleaf Solutions

0.07

Correlation Coefficient

HempAmericana  Nextleaf Solutions

Significant diversification

The 3 months correlation between HempAmericana and Nextleaf is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HempAmericana and Nextleaf Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextleaf Solutions and HempAmericana 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 HempAmericana 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 HempAmericana i.e., HempAmericana and Nextleaf Solutions go up and down completely randomly.

Pair Corralation between HempAmericana and Nextleaf Solutions

Given the investment horizon of 90 days HempAmericana is expected to generate 39.32 times more return on investment than Nextleaf Solutions. However, HempAmericana is 39.32 times more volatile than Nextleaf Solutions. It trades about 0.2 of its potential returns per unit of risk. Nextleaf Solutions is currently generating about -0.14 per unit of risk. If you would invest  0.01  in HempAmericana on October 8, 2024 and sell it today you would earn a total of  0.00  from holding HempAmericana or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HempAmericana  vs.  Nextleaf Solutions

HempAmericana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HempAmericana are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, HempAmericana 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 HempAmericana and Nextleaf Solutions

The main advantage of trading using opposite HempAmericana and Nextleaf Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HempAmericana 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 HempAmericana 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.