Correlation Between Cronos and SALT

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

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

Diversification Opportunities for Cronos and SALT

-0.43

Correlation Coefficient

Cronos  SALT

Very good diversification

The 3 months correlation between Cronos and SALT is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and SALT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALT and Cronos 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 Cronos are associated (or correlated) with SALT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALT has no effect on the direction of Cronos i.e., Cronos and SALT go up and down completely randomly.

Pair Corralation between Cronos and SALT

Assuming the 90 days trading horizon Cronos is expected to generate 119.95 times more return on investment than SALT. However, Cronos is 119.95 times more volatile than SALT. It trades about 0.15 of its potential returns per unit of risk. SALT is currently generating about -0.58 per unit of risk. If you would invest  9.14  in Cronos on April 24, 2025 and sell it today you would earn a total of  3.86  from holding Cronos or generate 42.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.69%
Values	Daily Returns

Cronos  vs.  SALT

Cronos

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

SALT

Risk-Adjusted Performance

Very Weak

Over the last 90 days SALT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, SALT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cronos and SALT

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

The idea behind Cronos and SALT 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.