Correlation Between Cronos and LYM

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

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

Diversification Opportunities for Cronos and LYM

0.67

Correlation Coefficient

Cronos  LYM

Poor diversification

The 3 months correlation between Cronos and LYM is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and LYM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYM 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 are associated (or correlated) with LYM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYM has no effect on the direction of Cronos i.e., Cronos and LYM go up and down completely randomly.

Pair Corralation between Cronos and LYM

Assuming the 90 days trading horizon Cronos is expected to under-perform the LYM. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cronos is 5.16 times less risky than LYM. The crypto coin trades about -0.05 of its potential returns per unit of risk. The LYM is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.07  in LYM on December 29, 2024 and sell it today you would lose (0.02) from holding LYM or give up 25.26% of portfolio value over 90 days.

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

Cronos  vs.  LYM

Cronos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cronos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Cronos shareholders.

LYM

Risk-Adjusted Performance

OK

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

Pair Trading with Cronos and LYM

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

The idea behind Cronos and LYM 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..