Correlation Between Lowell Farms and Red Light

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

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

Diversification Opportunities for Lowell Farms and Red Light

0.11

Correlation Coefficient

Lowell Farms  Red Light

Average diversification

The 3 months correlation between Lowell and Red is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lowell Farms and Red Light Holland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Light Holland 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 Red Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Light Holland has no effect on the direction of Lowell Farms i.e., Lowell Farms and Red Light go up and down completely randomly.

Pair Corralation between Lowell Farms and Red Light

Assuming the 90 days horizon Lowell Farms is expected to generate 2.88 times more return on investment than Red Light. However, Lowell Farms is 2.88 times more volatile than Red Light Holland. It trades about 0.04 of its potential returns per unit of risk. Red Light Holland is currently generating about 0.0 per unit of risk. If you would invest  71.00  in Lowell Farms on October 11, 2024 and sell it today you would lose (69.20) from holding Lowell Farms or give up 97.46% of portfolio value over 90 days.

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

Lowell Farms  vs.  Red Light Holland

Lowell Farms

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 11 (%) 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.

Red Light Holland

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Light Holland are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Red Light reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lowell Farms and Red Light

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

The idea behind Lowell Farms and Red Light Holland 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.