Correlation Between Real Brands and Leef Brands

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

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

Diversification Opportunities for Real Brands and Leef Brands

-0.54

Correlation Coefficient

Real Brands  Leef Brands

Excellent diversification

The 3 months correlation between Real and Leef is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Real Brands and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands and Real 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 Real Brands are associated (or correlated) with Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of Real Brands i.e., Real Brands and Leef Brands go up and down completely randomly.

Pair Corralation between Real Brands and Leef Brands

Given the investment horizon of 90 days Real Brands is expected to under-perform the Leef Brands. In addition to that, Real Brands is 1.95 times more volatile than Leef Brands. It trades about 0.0 of its total potential returns per unit of risk. Leef Brands is currently generating about 0.15 per unit of volatility. If you would invest  6.67  in Leef Brands on September 2, 2024 and sell it today you would earn a total of  8.33  from holding Leef Brands or generate 124.89% return on investment over 90 days.

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

Real Brands  vs.  Leef Brands

Real Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Real Brands is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Leef Brands

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leef Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Leef Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Real Brands and Leef Brands

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

The idea behind Real Brands and Leef Brands 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.