Correlation Between Cronos and Premium Income
Can any of the company-specific risk be diversified away by investing in both Cronos and Premium Income 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 Premium Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cronos Group and Premium Income, you can compare the effects of market volatilities on Cronos and Premium Income 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 Premium Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Premium Income.
Diversification Opportunities for Cronos and Premium Income
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cronos and Premium is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income 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 Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of Cronos i.e., Cronos and Premium Income go up and down completely randomly.
Pair Corralation between Cronos and Premium Income
Assuming the 90 days trading horizon Cronos Group is expected to under-perform the Premium Income. In addition to that, Cronos is 1.81 times more volatile than Premium Income. It trades about -0.03 of its total potential returns per unit of risk. Premium Income is currently generating about 0.05 per unit of volatility. If you would invest 589.00 in Premium Income on September 13, 2024 and sell it today you would earn a total of 48.00 from holding Premium Income or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cronos Group vs. Premium Income
Performance |
| Timeline |
| Cronos Group |
| Premium Income |
Cronos and Premium Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cronos and Premium Income
The main advantage of trading using opposite Cronos and Premium Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cronos position performs unexpectedly, Premium Income 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 Premium Income will offset losses from the drop in Premium Income's long position.The idea behind Cronos Group and Premium Income 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.| Premium Income vs. Berkshire Hathaway CDR | Premium Income vs. E L Financial Corp | Premium Income vs. E L Financial 3 | Premium Income vs. Molson Coors Canada |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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