Correlation Between Cronos and OrganiGram Holdings

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

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

Diversification Opportunities for Cronos and OrganiGram Holdings

0.69

Correlation Coefficient

Cronos  OrganiGram Holdings

Poor diversification

The 3 months correlation between Cronos and OrganiGram is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and OrganiGram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OrganiGram Holdings 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 OrganiGram Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OrganiGram Holdings has no effect on the direction of Cronos i.e., Cronos and OrganiGram Holdings go up and down completely randomly.

Pair Corralation between Cronos and OrganiGram Holdings

Assuming the 90 days trading horizon Cronos is expected to generate 3.27 times less return on investment than OrganiGram Holdings. But when comparing it to its historical volatility, Cronos Group is 1.54 times less risky than OrganiGram Holdings. It trades about 0.02 of its potential returns per unit of risk. OrganiGram Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  180.00  in OrganiGram Holdings on September 20, 2024 and sell it today you would earn a total of  30.00  from holding OrganiGram Holdings or generate 16.67% return on investment over 90 days.

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

Cronos Group  vs.  OrganiGram Holdings

Cronos Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cronos Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cronos is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

OrganiGram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OrganiGram Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cronos and OrganiGram Holdings

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

The idea behind Cronos Group and OrganiGram Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.