Correlation Between Clever Leaves and Lowell Farms

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

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

Diversification Opportunities for Clever Leaves and Lowell Farms

0.25

Correlation Coefficient

Clever Leaves  Lowell Farms

Modest diversification

The 3 months correlation between Clever and Lowell is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Clever Leaves Holdings and Lowell Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowell Farms and Clever Leaves 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 Clever Leaves Holdings 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 Clever Leaves i.e., Clever Leaves and Lowell Farms go up and down completely randomly.

Pair Corralation between Clever Leaves and Lowell Farms

Given the investment horizon of 90 days Clever Leaves Holdings is expected to generate 10.82 times more return on investment than Lowell Farms. However, Clever Leaves is 10.82 times more volatile than Lowell Farms. It trades about 0.22 of its potential returns per unit of risk. Lowell Farms is currently generating about 0.12 per unit of risk. If you would invest  0.03  in Clever Leaves Holdings on September 22, 2024 and sell it today you would lose (0.01) from holding Clever Leaves Holdings or give up 33.33% of portfolio value over 90 days.

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

Clever Leaves Holdings  vs.  Lowell Farms

Clever Leaves Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clever Leaves Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Clever Leaves reported solid returns over the last few months and may actually be approaching a breakup point.

Lowell Farms

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Lowell Farms reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clever Leaves and Lowell Farms

The main advantage of trading using opposite Clever Leaves and Lowell Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clever Leaves 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 Clever Leaves Holdings 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.