Correlation Between Canopy Growth and Cronos

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

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

Diversification Opportunities for Canopy Growth and Cronos

0.76

Correlation Coefficient

Canopy Growth  Cronos

Poor diversification

The 3 months correlation between Canopy and Cronos is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group and Canopy Growth 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 Canopy Growth 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 Canopy Growth i.e., Canopy Growth and Cronos go up and down completely randomly.

Pair Corralation between Canopy Growth and Cronos

Assuming the 90 days trading horizon Canopy Growth Corp is expected to under-perform the Cronos. In addition to that, Canopy Growth is 1.69 times more volatile than Cronos Group. It trades about -0.54 of its total potential returns per unit of risk. Cronos Group is currently generating about -0.16 per unit of volatility. If you would invest  298.00  in Cronos Group on September 24, 2024 and sell it today you would lose (19.00) from holding Cronos Group or give up 6.38% of portfolio value over 90 days.

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

Canopy Growth Corp  vs.  Cronos Group

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 Canopy Growth and Cronos

The main advantage of trading using opposite Canopy Growth and Cronos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canopy Growth 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 Canopy Growth 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.