Correlation Between Lowell Farms and INC Research

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

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

Diversification Opportunities for Lowell Farms and INC Research

0.04

Correlation Coefficient

Lowell Farms  INC Research

Significant diversification

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

Pair Corralation between Lowell Farms and INC Research

Assuming the 90 days horizon Lowell Farms is expected to generate 6.16 times more return on investment than INC Research. However, Lowell Farms is 6.16 times more volatile than INC Research Holdings. It trades about 0.13 of its potential returns per unit of risk. INC Research Holdings is currently generating about -0.14 per unit of risk. If you would invest  1.50  in Lowell Farms on September 3, 2024 and sell it today you would earn a total of  0.10  from holding Lowell Farms or generate 6.67% return on investment over 90 days.

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

Lowell Farms  vs.  INC Research Holdings

Lowell Farms

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Lowell Farms reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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.

Pair Trading with Lowell Farms and INC Research

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

The idea behind Lowell Farms and INC Research 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.