Correlation Between Red Light and Leef Brands
Can any of the company-specific risk be diversified away by investing in both Red Light 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 Red Light and Leef Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Light Holland and Leef Brands, you can compare the effects of market volatilities on Red Light 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 Red Light with a short position of Leef Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Light and Leef Brands.
Diversification Opportunities for Red Light and Leef Brands
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Red and Leef is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Red Light Holland and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands and Red Light 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 Red Light Holland 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 Red Light i.e., Red Light and Leef Brands go up and down completely randomly.
Pair Corralation between Red Light and Leef Brands
Assuming the 90 days horizon Red Light Holland is expected to generate 0.8 times more return on investment than Leef Brands. However, Red Light Holland is 1.25 times less risky than Leef Brands. It trades about 0.14 of its potential returns per unit of risk. Leef Brands is currently generating about 0.05 per unit of risk. If you would invest 2.60 in Red Light Holland on August 29, 2024 and sell it today you would earn a total of 0.58 from holding Red Light Holland or generate 22.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Light Holland vs. Leef Brands
Performance |
| Timeline |
| Red Light Holland |
| Leef Brands |
Red Light and Leef Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Light and Leef Brands
The main advantage of trading using opposite Red Light and Leef Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Light 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.| Red Light vs. Grey Cloak Tech | Red Light vs. Lobe Sciences | Red Light vs. Mydecine Innovations Group | Red Light vs. Charlottes Web Holdings |
| Leef Brands vs. Apple Inc | Leef Brands vs. Microsoft | Leef Brands vs. Alphabet Inc Class C | Leef Brands vs. Meta Platforms |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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