Correlation Between Nextleaf Solutions and HempAmericana

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

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

Diversification Opportunities for Nextleaf Solutions and HempAmericana

0.07

Correlation Coefficient

Nextleaf Solutions  HempAmericana

Significant diversification

The 3 months correlation between Nextleaf and HempAmericana is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nextleaf Solutions and HempAmericana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HempAmericana 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 HempAmericana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HempAmericana has no effect on the direction of Nextleaf Solutions i.e., Nextleaf Solutions and HempAmericana go up and down completely randomly.

Pair Corralation between Nextleaf Solutions and HempAmericana

Assuming the 90 days horizon Nextleaf Solutions is expected to generate 9.4 times less return on investment than HempAmericana. But when comparing it to its historical volatility, Nextleaf Solutions is 7.9 times less risky than HempAmericana. It trades about 0.04 of its potential returns per unit of risk. HempAmericana is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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	99.65%
Values	Daily Returns

Nextleaf Solutions  vs.  HempAmericana

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.

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.

Pair Trading with Nextleaf Solutions and HempAmericana

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

The idea behind Nextleaf Solutions and HempAmericana 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 Global Correlations module to find global opportunities by holding instruments from different markets.