Correlation Between Cresco Labs and GrowGeneration Corp

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

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

Diversification Opportunities for Cresco Labs and GrowGeneration Corp

0.6

Correlation Coefficient

Cresco Labs  GrowGeneration Corp

Poor diversification

The 3 months correlation between Cresco and GrowGeneration is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cresco Labs and GrowGeneration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrowGeneration Corp 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 GrowGeneration Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrowGeneration Corp has no effect on the direction of Cresco Labs i.e., Cresco Labs and GrowGeneration Corp go up and down completely randomly.

Pair Corralation between Cresco Labs and GrowGeneration Corp

Assuming the 90 days horizon Cresco Labs is expected to under-perform the GrowGeneration Corp. In addition to that, Cresco Labs is 1.62 times more volatile than GrowGeneration Corp. It trades about -0.06 of its total potential returns per unit of risk. GrowGeneration Corp is currently generating about 0.02 per unit of volatility. If you would invest  193.00  in GrowGeneration Corp on September 3, 2024 and sell it today you would earn a total of  1.00  from holding GrowGeneration Corp or generate 0.52% return on investment over 90 days.

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

Cresco Labs  vs.  GrowGeneration Corp

Cresco Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cresco Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GrowGeneration Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GrowGeneration Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GrowGeneration Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cresco Labs and GrowGeneration Corp

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

The idea behind Cresco Labs and GrowGeneration 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.