Correlation Between Fire Flower and Leafly Holdings

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

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

Diversification Opportunities for Fire Flower and Leafly Holdings

0.0

Correlation Coefficient

Fire Flower  Leafly Holdings

Pay attention - limited upside

The 3 months correlation between Fire and Leafly is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fire Flower Holdings and Leafly Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leafly Holdings and Fire Flower 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 Fire Flower Holdings are associated (or correlated) with Leafly Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leafly Holdings has no effect on the direction of Fire Flower i.e., Fire Flower and Leafly Holdings go up and down completely randomly.

Pair Corralation between Fire Flower and Leafly Holdings

Assuming the 90 days horizon Fire Flower Holdings is expected to under-perform the Leafly Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fire Flower Holdings is 15.86 times less risky than Leafly Holdings. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Leafly Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8.78  in Leafly Holdings on August 31, 2024 and sell it today you would lose (6.26) from holding Leafly Holdings or give up 71.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.21%
Values	Daily Returns

Fire Flower Holdings  vs.  Leafly Holdings

Fire Flower Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Leafly Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leafly Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Leafly Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fire Flower and Leafly Holdings

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

The idea behind Fire Flower Holdings and Leafly Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.