Correlation Between Cronos and TQM PORATION

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

By analyzing existing cross correlation between Cronos Group and TQM PORATION, you can compare the effects of market volatilities on Cronos and TQM PORATION 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 TQM PORATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and TQM PORATION.

Diversification Opportunities for Cronos and TQM PORATION

0.79

Correlation Coefficient

Cronos  TQM PORATION

Poor diversification

The 3 months correlation between Cronos and TQM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and TQM PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TQM PORATION 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 Group are associated (or correlated) with TQM PORATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TQM PORATION has no effect on the direction of Cronos i.e., Cronos and TQM PORATION go up and down completely randomly.

Pair Corralation between Cronos and TQM PORATION

Given the investment horizon of 90 days Cronos Group is expected to under-perform the TQM PORATION. In addition to that, Cronos is 9.38 times more volatile than TQM PORATION. It trades about -0.09 of its total potential returns per unit of risk. TQM PORATION is currently generating about -0.24 per unit of volatility. If you would invest  2,583  in TQM PORATION on January 26, 2024 and sell it today you would lose (33.00) from holding TQM PORATION or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.82%
Values	Daily Returns

Cronos Group  vs.  TQM PORATION

Cronos Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Cronos displayed solid returns over the last few months and may actually be approaching a breakup point.

TQM PORATION

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TQM PORATION are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TQM PORATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cronos and TQM PORATION

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

The idea behind Cronos Group and TQM PORATION 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.