Correlation Between China SXT and Cresco Labs

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

By analyzing existing cross correlation between China SXT Pharmaceuticals and Cresco Labs, you can compare the effects of market volatilities on China SXT and Cresco Labs 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 China SXT with a short position of Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of China SXT and Cresco Labs.

Diversification Opportunities for China SXT and Cresco Labs

-0.28

Correlation Coefficient

China SXT  Cresco Labs

Very good diversification

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

Pair Corralation between China SXT and Cresco Labs

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to generate 5.16 times more return on investment than Cresco Labs. However, China SXT is 5.16 times more volatile than Cresco Labs. It trades about 0.15 of its potential returns per unit of risk. Cresco Labs is currently generating about -0.15 per unit of risk. If you would invest  316.00  in China SXT Pharmaceuticals on December 4, 2024 and sell it today you would earn a total of  153.00  from holding China SXT Pharmaceuticals or generate 48.42% return on investment over 90 days.

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

China SXT Pharmaceuticals  vs.  Cresco Labs

China SXT Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China SXT Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, China SXT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cresco Labs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cresco Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China SXT and Cresco Labs

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

The idea behind China SXT Pharmaceuticals and Cresco Labs 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.