Correlation Between Cronos and Cresco Labs

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

By analyzing existing cross correlation between Cronos Group and Cresco Labs, you can compare the effects of market volatilities on Cronos and Cresco Labs 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 Cronos with a short position of Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Cresco Labs.

Diversification Opportunities for Cronos and Cresco Labs

0.64

Correlation Coefficient

Cronos  Cresco Labs

Poor diversification

The 3 months correlation between Cronos and Cresco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs and Cronos 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 Cronos Group are associated (or correlated) with Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of Cronos i.e., Cronos and Cresco Labs go up and down completely randomly.

Pair Corralation between Cronos and Cresco Labs

Given the investment horizon of 90 days Cronos Group is expected to generate 0.78 times more return on investment than Cresco Labs. However, Cronos Group is 1.28 times less risky than Cresco Labs. It trades about 0.11 of its potential returns per unit of risk. Cresco Labs is currently generating about 0.03 per unit of risk. If you would invest  198.00  in Cronos Group on March 14, 2024 and sell it today you would earn a total of  50.00  from holding Cronos Group or generate 25.25% return on investment over 90 days.

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

Cronos Group  vs.  Cresco Labs

Cronos Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Cronos displayed solid returns over the last few months and may actually be approaching a breakup point.

Cresco Labs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cresco Labs are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Cresco Labs may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Cronos and Cresco Labs

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

The idea behind Cronos Group and Cresco Labs 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.