Correlation Between Lowell Farms and Ascend Wellness

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

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

Diversification Opportunities for Lowell Farms and Ascend Wellness

0.33

Correlation Coefficient

Lowell Farms  Ascend Wellness

Weak diversification

The 3 months correlation between Lowell and Ascend is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lowell Farms 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 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 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 Lowell Farms i.e., Lowell Farms and Ascend Wellness go up and down completely randomly.

Pair Corralation between Lowell Farms and Ascend Wellness

Assuming the 90 days horizon Lowell Farms is expected to generate 3.42 times more return on investment than Ascend Wellness. However, Lowell Farms is 3.42 times more volatile than Ascend Wellness Holdings. It trades about 0.04 of its potential returns per unit of risk. Ascend Wellness Holdings is currently generating about 0.01 per unit of risk. If you would invest  1.90  in Lowell Farms on December 4, 2024 and sell it today you would lose (0.71) from holding Lowell Farms or give up 37.37% 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.  Ascend Wellness Holdings

Lowell Farms

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 2 (%) 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.

Ascend Wellness Holdings

Risk-Adjusted Performance

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 fairly strong basic indicators, Ascend Wellness is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lowell Farms and Ascend Wellness

The main advantage of trading using opposite Lowell Farms and Ascend Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowell Farms 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 Lowell Farms 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.