Correlation Between Aleafia Health and Lowell Farms

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

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

Diversification Opportunities for Aleafia Health and Lowell Farms

0.04

Correlation Coefficient

Aleafia Health  Lowell Farms

Significant diversification

The 3 months correlation between Aleafia and Lowell is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Aleafia Health and Lowell Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowell Farms and Aleafia Health 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 Aleafia Health are associated (or correlated) with Lowell Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowell Farms has no effect on the direction of Aleafia Health i.e., Aleafia Health and Lowell Farms go up and down completely randomly.

Pair Corralation between Aleafia Health and Lowell Farms

If you would invest  1.00  in Lowell Farms on September 4, 2024 and sell it today you would earn a total of  0.80  from holding Lowell Farms or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Aleafia Health  vs.  Lowell Farms

Aleafia Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lowell Farms

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Lowell Farms reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aleafia Health and Lowell Farms

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

The idea behind Aleafia Health and Lowell Farms 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.