Correlation Between Silver Spike and Lowell Farms

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

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

Diversification Opportunities for Silver Spike and Lowell Farms

0.61

Correlation Coefficient

Silver Spike  Lowell Farms

Poor diversification

The 3 months correlation between Silver and Lowell is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Silver Spike Investment and Lowell Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowell Farms and Silver Spike 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 Silver Spike Investment 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 Silver Spike i.e., Silver Spike and Lowell Farms go up and down completely randomly.

Pair Corralation between Silver Spike and Lowell Farms

Given the investment horizon of 90 days Silver Spike is expected to generate 6.18 times less return on investment than Lowell Farms. But when comparing it to its historical volatility, Silver Spike Investment is 13.85 times less risky than Lowell Farms. It trades about 0.13 of its potential returns per unit of risk. Lowell Farms is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.80  in Lowell Farms on September 19, 2024 and sell it today you would lose (0.80) from holding Lowell Farms or give up 44.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.54%
Values	Daily Returns

Silver Spike Investment  vs.  Lowell Farms

Silver Spike Investment

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Silver Spike Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile forward indicators, Silver Spike exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lowell Farms

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 4 (%) 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 Silver Spike and Lowell Farms

The main advantage of trading using opposite Silver Spike and Lowell Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Spike 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 Silver Spike Investment 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.