Correlation Between INC Research and Lowell Farms

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

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

Diversification Opportunities for INC Research and Lowell Farms

-0.15

Correlation Coefficient

INC Research  Lowell Farms

Good diversification

The 3 months correlation between INC and Lowell is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Lowell Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowell Farms and INC Research 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 INC Research 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 INC Research i.e., INC Research and Lowell Farms go up and down completely randomly.

Pair Corralation between INC Research and Lowell Farms

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Lowell Farms. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 4.63 times less risky than Lowell Farms. The stock trades about -0.07 of its potential returns per unit of risk. The Lowell Farms is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.40  in Lowell Farms on September 20, 2024 and sell it today you would lose (0.10) from holding Lowell Farms or give up 7.14% of portfolio value over 90 days.

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

INC Research Holdings  vs.  Lowell Farms

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Lowell Farms

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 7 (%) 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 INC Research and Lowell Farms

The main advantage of trading using opposite INC Research and Lowell Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INC Research 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 INC Research 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.