Correlation Between Cronos and Biome Grow

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

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

Diversification Opportunities for Cronos and Biome Grow

0.28

Correlation Coefficient

Cronos  Biome Grow

Modest diversification

The 3 months correlation between Cronos and Biome is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Biome Grow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biome Grow 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 Biome Grow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biome Grow has no effect on the direction of Cronos i.e., Cronos and Biome Grow go up and down completely randomly.

Pair Corralation between Cronos and Biome Grow

Given the investment horizon of 90 days Cronos is expected to generate 18.14 times less return on investment than Biome Grow. But when comparing it to its historical volatility, Cronos Group is 16.35 times less risky than Biome Grow. It trades about 0.06 of its potential returns per unit of risk. Biome Grow is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.38  in Biome Grow on October 6, 2024 and sell it today you would lose (0.19) from holding Biome Grow or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Cronos Group  vs.  Biome Grow

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 recent stock price disarray, may contribute to short-term losses for the investors.

Biome Grow

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biome Grow are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Biome Grow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cronos and Biome Grow

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

The idea behind Cronos Group and Biome Grow 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.