Correlation Between Lowell Farms and Clever Leaves

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

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

Diversification Opportunities for Lowell Farms and Clever Leaves

0.25

Correlation Coefficient

Lowell Farms  Clever Leaves

Modest diversification

The 3 months correlation between Lowell and Clever is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lowell Farms 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 Lowell Farms 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 Lowell Farms 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 Lowell Farms i.e., Lowell Farms and Clever Leaves go up and down completely randomly.

Pair Corralation between Lowell Farms and Clever Leaves

Assuming the 90 days horizon Lowell Farms is expected to generate 26.26 times less return on investment than Clever Leaves. But when comparing it to its historical volatility, Lowell Farms is 10.88 times less risky than Clever Leaves. It trades about 0.09 of its potential returns per unit of risk. Clever Leaves Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Clever Leaves Holdings on September 20, 2024 and sell it today you would lose (0.03) from holding Clever Leaves Holdings or give up 100.0% of portfolio value over 90 days.

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

Lowell Farms  vs.  Clever Leaves Holdings

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.

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.

Pair Trading with Lowell Farms and Clever Leaves

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.