Correlation Between Cronos and Near
Can any of the company-specific risk be diversified away by investing in both Cronos and Near 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 Near into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cronos and Near, you can compare the effects of market volatilities on Cronos and Near 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 Near. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Near.
Diversification Opportunities for Cronos and Near
Very poor diversification
The 3 months correlation between Cronos and Near is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and Near in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near 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 Near. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near has no effect on the direction of Cronos i.e., Cronos and Near go up and down completely randomly.
Pair Corralation between Cronos and Near
Assuming the 90 days trading horizon Cronos is expected to generate 1.3 times more return on investment than Near. However, Cronos is 1.3 times more volatile than Near. It trades about 0.04 of its potential returns per unit of risk. Near is currently generating about -0.02 per unit of risk. If you would invest 12.00 in Cronos on November 3, 2024 and sell it today you would earn a total of 1.00 from holding Cronos or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.46% |
| Values | Daily Returns |
Cronos vs. Near
Performance |
| Timeline |
| Cronos |
| Near |
Cronos and Near Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cronos and Near
The main advantage of trading using opposite Cronos and Near positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cronos position performs unexpectedly, Near 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 Near will offset losses from the drop in Near's long position.The idea behind Cronos and Near 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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