Correlation Between Fastenal and Leef Brands

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

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

Diversification Opportunities for Fastenal and Leef Brands

0.02

Correlation Coefficient

Fastenal  Leef Brands

Significant diversification

The 3 months correlation between Fastenal and Leef is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands and Fastenal 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 Fastenal Company 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 Fastenal i.e., Fastenal and Leef Brands go up and down completely randomly.

Pair Corralation between Fastenal and Leef Brands

Given the investment horizon of 90 days Fastenal is expected to generate 27.72 times less return on investment than Leef Brands. But when comparing it to its historical volatility, Fastenal Company is 7.96 times less risky than Leef Brands. It trades about 0.05 of its potential returns per unit of risk. Leef Brands is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6.70  in Leef Brands on September 22, 2024 and sell it today you would earn a total of  11.30  from holding Leef Brands or generate 168.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Fastenal Company  vs.  Leef Brands

Fastenal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fastenal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Leef Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leef Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating 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 Fastenal and Leef Brands

The main advantage of trading using opposite Fastenal and Leef Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastenal 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 Fastenal Company 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.