Correlation Between RIV Capital and Auxly Cannabis

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

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

Diversification Opportunities for RIV Capital and Auxly Cannabis

0.25

Correlation Coefficient

RIV Capital  Auxly Cannabis

Modest diversification

The 3 months correlation between RIV and Auxly is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding RIV Capital 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 RIV Capital 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 RIV Capital 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 RIV Capital i.e., RIV Capital and Auxly Cannabis go up and down completely randomly.

Pair Corralation between RIV Capital and Auxly Cannabis

Assuming the 90 days horizon RIV Capital is expected to generate 2.02 times more return on investment than Auxly Cannabis. However, RIV Capital is 2.02 times more volatile than Auxly Cannabis Group. It trades about 0.04 of its potential returns per unit of risk. Auxly Cannabis Group is currently generating about -0.1 per unit of risk. If you would invest  8.90  in RIV Capital on September 16, 2024 and sell it today you would lose (0.10) from holding RIV Capital or give up 1.12% of portfolio value over 90 days.

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

RIV Capital  vs.  Auxly Cannabis Group

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Auxly Cannabis Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auxly Cannabis Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Auxly Cannabis is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RIV Capital and Auxly Cannabis

The main advantage of trading using opposite RIV Capital and Auxly Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RIV Capital 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 RIV Capital 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.