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

0.37

Correlation Coefficient

Canopy Growth  Cronos

Weak diversification

The 3 months correlation between Canopy and Cronos is 0.37. 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 is expected to generate 3.39 times less return on investment than Cronos. In addition to that, Canopy Growth is 3.35 times more volatile than Cronos Group. It trades about 0.01 of its total potential returns per unit of risk. Cronos Group is currently generating about 0.11 per unit of volatility. If you would invest  248.00  in Cronos Group on April 23, 2025 and sell it today you would earn a total of  36.00  from holding Cronos Group or generate 14.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Canopy Growth Corp  vs.  Cronos Group

Canopy Growth Corp

Risk-Adjusted Performance

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 very healthy basic indicators, Canopy Growth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cronos Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cronos displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.