Correlation Between Cronos and Mydecine Innovations

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

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

Diversification Opportunities for Cronos and Mydecine Innovations

0.17

Correlation Coefficient

Cronos  Mydecine Innovations

Average diversification

The 3 months correlation between Cronos and Mydecine is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Mydecine Innovations Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mydecine Innovations 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 Mydecine Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mydecine Innovations has no effect on the direction of Cronos i.e., Cronos and Mydecine Innovations go up and down completely randomly.

Pair Corralation between Cronos and Mydecine Innovations

Given the investment horizon of 90 days Cronos is expected to generate 38.43 times less return on investment than Mydecine Innovations. But when comparing it to its historical volatility, Cronos Group is 20.93 times less risky than Mydecine Innovations. It trades about 0.06 of its potential returns per unit of risk. Mydecine Innovations Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Mydecine Innovations Group on October 6, 2024 and sell it today you would lose (0.20) from holding Mydecine Innovations Group or give up 33.33% of portfolio value over 90 days.

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

Cronos Group  vs.  Mydecine Innovations Group

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.

Mydecine Innovations

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mydecine Innovations Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mydecine Innovations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cronos and Mydecine Innovations

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

The idea behind Cronos Group and Mydecine Innovations Group 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.