Correlation Between Aquestive Therapeutics and Cresco Labs

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

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

Diversification Opportunities for Aquestive Therapeutics and Cresco Labs

0.43

Correlation Coefficient

Aquestive Therapeutics  Cresco Labs

Very weak diversification

The 3 months correlation between Aquestive and Cresco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aquestive Therapeutics and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs and Aquestive Therapeutics 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 Aquestive Therapeutics 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 Aquestive Therapeutics i.e., Aquestive Therapeutics and Cresco Labs go up and down completely randomly.

Pair Corralation between Aquestive Therapeutics and Cresco Labs

Given the investment horizon of 90 days Aquestive Therapeutics is expected to under-perform the Cresco Labs. But the stock apears to be less risky and, when comparing its historical volatility, Aquestive Therapeutics is 1.29 times less risky than Cresco Labs. The stock trades about -0.01 of its potential returns per unit of risk. The Cresco Labs is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Cresco Labs on December 27, 2024 and sell it today you would lose (6.00) from holding Cresco Labs or give up 7.06% of portfolio value over 90 days.

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

Aquestive Therapeutics  vs.  Cresco Labs

Aquestive Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aquestive Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aquestive Therapeutics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cresco Labs

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aquestive Therapeutics and Cresco Labs

The main advantage of trading using opposite Aquestive Therapeutics and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquestive Therapeutics 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 Aquestive Therapeutics 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..