Correlation Between LQwD FinTech and Cronos

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

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

Diversification Opportunities for LQwD FinTech and Cronos

-0.54

Correlation Coefficient

LQwD FinTech  Cronos

Excellent diversification

The 3 months correlation between LQwD and Cronos is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding LQwD FinTech Corp and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group and LQwD FinTech 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 LQwD FinTech Corp are associated (or correlated) with Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos Group has no effect on the direction of LQwD FinTech i.e., LQwD FinTech and Cronos go up and down completely randomly.

Pair Corralation between LQwD FinTech and Cronos

Assuming the 90 days trading horizon LQwD FinTech Corp is expected to generate 5.64 times more return on investment than Cronos. However, LQwD FinTech is 5.64 times more volatile than Cronos Group. It trades about 0.26 of its potential returns per unit of risk. Cronos Group is currently generating about -0.08 per unit of risk. If you would invest  149.00  in LQwD FinTech Corp on September 20, 2024 and sell it today you would earn a total of  95.00  from holding LQwD FinTech Corp or generate 63.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

LQwD FinTech Corp  vs.  Cronos Group

LQwD FinTech Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LQwD FinTech Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LQwD FinTech showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with LQwD FinTech and Cronos

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

The idea behind LQwD FinTech Corp and Cronos 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.