Correlation Between Chatham Rock and Cronos

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

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

Diversification Opportunities for Chatham Rock and Cronos

-0.41

Correlation Coefficient

Chatham Rock  Cronos

Very good diversification

The 3 months correlation between Chatham and Cronos is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Rock Phosphate and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group and Chatham Rock 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 Chatham Rock Phosphate 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 Chatham Rock i.e., Chatham Rock and Cronos go up and down completely randomly.

Pair Corralation between Chatham Rock and Cronos

Assuming the 90 days horizon Chatham Rock Phosphate is expected to generate 7.04 times more return on investment than Cronos. However, Chatham Rock is 7.04 times more volatile than Cronos Group. It trades about 0.09 of its potential returns per unit of risk. Cronos Group is currently generating about -0.08 per unit of risk. If you would invest  9.00  in Chatham Rock Phosphate on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Chatham Rock Phosphate or generate 11.11% return on investment over 90 days.

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

Chatham Rock Phosphate  vs.  Cronos Group

Chatham Rock Phosphate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Rock Phosphate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chatham Rock 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 Chatham Rock and Cronos

The main advantage of trading using opposite Chatham Rock and Cronos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chatham Rock 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 Chatham Rock Phosphate 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.