Correlation Between Cronos and Takeda Pharmaceutical

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

By analyzing existing cross correlation between Cronos Group and Takeda Pharmaceutical Co, you can compare the effects of market volatilities on Cronos and Takeda Pharmaceutical 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 Takeda Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Takeda Pharmaceutical.

Diversification Opportunities for Cronos and Takeda Pharmaceutical

-0.5

Correlation Coefficient

Cronos  Takeda Pharmaceutical

Very good diversification

The 3 months correlation between Cronos and Takeda is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Takeda Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Cronos i.e., Cronos and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between Cronos and Takeda Pharmaceutical

Given the investment horizon of 90 days Cronos Group is expected to generate 2.29 times more return on investment than Takeda Pharmaceutical. However, Cronos is 2.29 times more volatile than Takeda Pharmaceutical Co. It trades about 0.11 of its potential returns per unit of risk. Takeda Pharmaceutical Co is currently generating about -0.04 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  52.00  from holding Cronos Group or generate 26.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Cronos Group  vs.  Takeda Pharmaceutical Co

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.

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cronos and Takeda Pharmaceutical

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

The idea behind Cronos Group and Takeda Pharmaceutical Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.