Correlation Between Lowell Farms and Flora Growth

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

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

Diversification Opportunities for Lowell Farms and Flora Growth

-0.45

Correlation Coefficient

Lowell Farms  Flora Growth

Very good diversification

The 3 months correlation between Lowell and Flora is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lowell Farms and Flora Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flora Growth Corp 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 Flora Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flora Growth Corp has no effect on the direction of Lowell Farms i.e., Lowell Farms and Flora Growth go up and down completely randomly.

Pair Corralation between Lowell Farms and Flora Growth

Assuming the 90 days horizon Lowell Farms is expected to generate 1.84 times less return on investment than Flora Growth. In addition to that, Lowell Farms is 2.44 times more volatile than Flora Growth Corp. It trades about 0.06 of its total potential returns per unit of risk. Flora Growth Corp is currently generating about 0.26 per unit of volatility. If you would invest  105.00  in Flora Growth Corp on July 20, 2024 and sell it today you would earn a total of  65.00  from holding Flora Growth Corp or generate 61.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lowell Farms  vs.  Flora Growth Corp

Lowell Farms

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lowell Farms are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Lowell Farms reported solid returns over the last few months and may actually be approaching a breakup point.

Flora Growth Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flora Growth Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Flora Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lowell Farms and Flora Growth

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

The idea behind Lowell Farms and Flora Growth Corp 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.