Correlation Between Leef Brands and Greater Cannabis

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

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

Diversification Opportunities for Leef Brands and Greater Cannabis

-0.6

Correlation Coefficient

Leef Brands  Greater Cannabis

Excellent diversification

The 3 months correlation between Leef and Greater is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Leef Brands and Greater Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greater Cannabis and Leef Brands 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 Leef Brands are associated (or correlated) with Greater Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greater Cannabis has no effect on the direction of Leef Brands i.e., Leef Brands and Greater Cannabis go up and down completely randomly.

Pair Corralation between Leef Brands and Greater Cannabis

Assuming the 90 days horizon Leef Brands is expected to generate 1.53 times less return on investment than Greater Cannabis. But when comparing it to its historical volatility, Leef Brands is 1.03 times less risky than Greater Cannabis. It trades about 0.04 of its potential returns per unit of risk. Greater Cannabis is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Greater Cannabis on August 31, 2024 and sell it today you would lose (0.01) from holding Greater Cannabis or give up 20.0% of portfolio value over 90 days.

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

Leef Brands  vs.  Greater Cannabis

Leef Brands

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leef Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Leef Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Greater Cannabis

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Greater Cannabis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Greater Cannabis displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leef Brands and Greater Cannabis

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

The idea behind Leef Brands and Greater Cannabis 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.