Correlation Between Cresco Labs and Aquestive Therapeutics

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

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

Diversification Opportunities for Cresco Labs and Aquestive Therapeutics

0.37

Correlation Coefficient

Cresco Labs  Aquestive Therapeutics

Weak diversification

The 3 months correlation between Cresco and Aquestive is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cresco Labs and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics and Cresco Labs 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 Cresco Labs are associated (or correlated) with Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of Cresco Labs i.e., Cresco Labs and Aquestive Therapeutics go up and down completely randomly.

Pair Corralation between Cresco Labs and Aquestive Therapeutics

Assuming the 90 days horizon Cresco Labs is expected to generate 1.25 times more return on investment than Aquestive Therapeutics. However, Cresco Labs is 1.25 times more volatile than Aquestive Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Aquestive Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  83.00  in Cresco Labs on December 29, 2024 and sell it today you would lose (5.00) from holding Cresco Labs or give up 6.02% of portfolio value over 90 days.

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

Cresco Labs  vs.  Aquestive Therapeutics

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.

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 latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cresco Labs and Aquestive Therapeutics

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

The idea behind Cresco Labs and Aquestive Therapeutics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.