Correlation Between Lobe Sciences and Ascend Wellness

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

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

Diversification Opportunities for Lobe Sciences and Ascend Wellness

0.26

Correlation Coefficient

Lobe Sciences  Ascend Wellness

Modest diversification

The 3 months correlation between Lobe and Ascend is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lobe Sciences and Ascend Wellness Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascend Wellness Holdings and Lobe Sciences 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 Lobe Sciences are associated (or correlated) with Ascend Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascend Wellness Holdings has no effect on the direction of Lobe Sciences i.e., Lobe Sciences and Ascend Wellness go up and down completely randomly.

Pair Corralation between Lobe Sciences and Ascend Wellness

Assuming the 90 days horizon Lobe Sciences is expected to generate 38.22 times more return on investment than Ascend Wellness. However, Lobe Sciences is 38.22 times more volatile than Ascend Wellness Holdings. It trades about 0.2 of its potential returns per unit of risk. Ascend Wellness Holdings is currently generating about -0.02 per unit of risk. If you would invest  3.84  in Lobe Sciences on September 25, 2024 and sell it today you would lose (2.16) from holding Lobe Sciences or give up 56.25% of portfolio value over 90 days.

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

Lobe Sciences  vs.  Ascend Wellness Holdings

Lobe Sciences

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lobe Sciences are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Lobe Sciences reported solid returns over the last few months and may actually be approaching a breakup point.

Ascend Wellness Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascend Wellness Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lobe Sciences and Ascend Wellness

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

The idea behind Lobe Sciences and Ascend Wellness 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.