Correlation Between Nextleaf Solutions and Auxly Cannabis

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

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

Diversification Opportunities for Nextleaf Solutions and Auxly Cannabis

0.31

Correlation Coefficient

Nextleaf Solutions  Auxly Cannabis

Weak diversification

The 3 months correlation between Nextleaf and Auxly is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nextleaf Solutions and Auxly Cannabis Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auxly Cannabis Group and Nextleaf Solutions 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 Nextleaf Solutions are associated (or correlated) with Auxly Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auxly Cannabis Group has no effect on the direction of Nextleaf Solutions i.e., Nextleaf Solutions and Auxly Cannabis go up and down completely randomly.

Pair Corralation between Nextleaf Solutions and Auxly Cannabis

Assuming the 90 days horizon Nextleaf Solutions is expected to generate 1.96 times less return on investment than Auxly Cannabis. But when comparing it to its historical volatility, Nextleaf Solutions is 1.21 times less risky than Auxly Cannabis. It trades about 0.04 of its potential returns per unit of risk. Auxly Cannabis Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.40  in Auxly Cannabis Group on October 8, 2024 and sell it today you would earn a total of  1.90  from holding Auxly Cannabis Group or generate 135.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.65%
Values	Daily Returns

Nextleaf Solutions  vs.  Auxly Cannabis Group

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.

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.

Pair Trading with Nextleaf Solutions and Auxly Cannabis

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

The idea behind Nextleaf Solutions and Auxly Cannabis Group 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.