Correlation Between Leafly Holdings and Raia Drogasil

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

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

Diversification Opportunities for Leafly Holdings and Raia Drogasil

0.21

Correlation Coefficient

Leafly Holdings  Raia Drogasil

Modest diversification

The 3 months correlation between Leafly and Raia is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Leafly Holdings and Raia Drogasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raia Drogasil SA and Leafly Holdings 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 Leafly Holdings are associated (or correlated) with Raia Drogasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raia Drogasil SA has no effect on the direction of Leafly Holdings i.e., Leafly Holdings and Raia Drogasil go up and down completely randomly.

Pair Corralation between Leafly Holdings and Raia Drogasil

Given the investment horizon of 90 days Leafly Holdings is expected to generate 1.32 times more return on investment than Raia Drogasil. However, Leafly Holdings is 1.32 times more volatile than Raia Drogasil SA. It trades about -0.04 of its potential returns per unit of risk. Raia Drogasil SA is currently generating about -0.06 per unit of risk. If you would invest  189.00  in Leafly Holdings on September 2, 2024 and sell it today you would lose (42.00) from holding Leafly Holdings or give up 22.22% of portfolio value over 90 days.

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

Leafly Holdings  vs.  Raia Drogasil SA

Leafly Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leafly Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Raia Drogasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Leafly Holdings and Raia Drogasil

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

The idea behind Leafly Holdings and Raia Drogasil SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.