Correlation Between Equillium and Clever Leaves

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

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

Diversification Opportunities for Equillium and Clever Leaves

0.03

Correlation Coefficient

Equillium  Clever Leaves

Significant diversification

The 3 months correlation between Equillium and Clever is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Clever Leaves Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clever Leaves Holdings and Equillium 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 Equillium are associated (or correlated) with Clever Leaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clever Leaves Holdings has no effect on the direction of Equillium i.e., Equillium and Clever Leaves go up and down completely randomly.

Pair Corralation between Equillium and Clever Leaves

Allowing for the 90-day total investment horizon Equillium is expected to under-perform the Clever Leaves. But the stock apears to be less risky and, when comparing its historical volatility, Equillium is 1.42 times less risky than Clever Leaves. The stock trades about -0.19 of its potential returns per unit of risk. The Clever Leaves Holdings is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3.90  in Clever Leaves Holdings on January 29, 2024 and sell it today you would lose (0.60) from holding Clever Leaves Holdings or give up 15.38% of portfolio value over 90 days.

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

Equillium  vs.  Clever Leaves Holdings

Equillium

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Clever Leaves Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clever Leaves Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Clever Leaves may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Equillium and Clever Leaves

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

The idea behind Equillium and Clever Leaves 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.