Correlation Between Yellow Pages and Cronos

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

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

Diversification Opportunities for Yellow Pages and Cronos

-0.54

Correlation Coefficient

Yellow Pages  Cronos

Excellent diversification

The 3 months correlation between Yellow and Cronos is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Yellow Pages Limited and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group and Yellow Pages 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 Yellow Pages Limited 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 Yellow Pages i.e., Yellow Pages and Cronos go up and down completely randomly.

Pair Corralation between Yellow Pages and Cronos

Given the investment horizon of 90 days Yellow Pages Limited is expected to generate 0.93 times more return on investment than Cronos. However, Yellow Pages Limited is 1.08 times less risky than Cronos. It trades about 0.0 of its potential returns per unit of risk. Cronos Group is currently generating about -0.16 per unit of risk. If you would invest  1,129  in Yellow Pages Limited on September 24, 2024 and sell it today you would lose (3.00) from holding Yellow Pages Limited or give up 0.27% of portfolio value over 90 days.

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

Yellow Pages Limited  vs.  Cronos Group

Yellow Pages Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Yellow Pages displayed 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 Yellow Pages and Cronos

The main advantage of trading using opposite Yellow Pages and Cronos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yellow Pages 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 Yellow Pages Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.