Correlation Between Link Reservations and Lowell Farms
Can any of the company-specific risk be diversified away by investing in both Link Reservations 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 Link Reservations and Lowell Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Link Reservations and Lowell Farms, you can compare the effects of market volatilities on Link Reservations 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 Link Reservations with a short position of Lowell Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Link Reservations and Lowell Farms.
Diversification Opportunities for Link Reservations and Lowell Farms
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Link and Lowell is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Link Reservations and Lowell Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowell Farms and Link Reservations 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 Link Reservations 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 Link Reservations i.e., Link Reservations and Lowell Farms go up and down completely randomly.
Pair Corralation between Link Reservations and Lowell Farms
Given the investment horizon of 90 days Link Reservations is expected to generate 3.46 times less return on investment than Lowell Farms. But when comparing it to its historical volatility, Link Reservations is 1.35 times less risky than Lowell Farms. It trades about 0.04 of its potential returns per unit of risk. Lowell Farms is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.60 in Lowell Farms on August 28, 2024 and sell it today you would lose (1.05) from holding Lowell Farms or give up 40.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Link Reservations vs. Lowell Farms
Performance |
| Timeline |
| Link Reservations |
| Lowell Farms |
Link Reservations and Lowell Farms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Link Reservations and Lowell Farms
The main advantage of trading using opposite Link Reservations and Lowell Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Link Reservations 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.| Link Reservations vs. Element Solutions | Link Reservations vs. Orion Engineered Carbons | Link Reservations vs. Minerals Technologies | Link Reservations vs. Ingevity Corp |
Check out your portfolio center.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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