Correlation Between Cronos and Canopy Growth

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

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

Diversification Opportunities for Cronos and Canopy Growth

0.74

Correlation Coefficient

Cronos  Canopy Growth

Poor diversification

The 3 months correlation between Cronos and Canopy is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Cronos i.e., Cronos and Canopy Growth go up and down completely randomly.

Pair Corralation between Cronos and Canopy Growth

Assuming the 90 days trading horizon Cronos Group is expected to generate 0.61 times more return on investment than Canopy Growth. However, Cronos Group is 1.63 times less risky than Canopy Growth. It trades about -0.02 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.11 per unit of risk. If you would invest  294.00  in Cronos Group on September 20, 2024 and sell it today you would lose (22.00) from holding Cronos Group or give up 7.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Cronos Group  vs.  Canopy Growth Corp

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.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cronos and Canopy Growth

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

The idea behind Cronos Group and Canopy Growth 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.