Correlation Between GM and Cresco Labs
Can any of the company-specific risk be diversified away by investing in both GM and Cresco Labs 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 GM and Cresco Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Cresco Labs, you can compare the effects of market volatilities on GM and Cresco Labs 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 GM with a short position of Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cresco Labs.
Diversification Opportunities for GM and Cresco Labs
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Cresco is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs and GM 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 General Motors are associated (or correlated) with Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of GM i.e., GM and Cresco Labs go up and down completely randomly.
Pair Corralation between GM and Cresco Labs
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.42 times more return on investment than Cresco Labs. However, General Motors is 2.37 times less risky than Cresco Labs. It trades about 0.05 of its potential returns per unit of risk. Cresco Labs is currently generating about -0.06 per unit of risk. If you would invest 4,627 in General Motors on October 22, 2024 and sell it today you would earn a total of 470.00 from holding General Motors or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
General Motors vs. Cresco Labs
Performance |
| Timeline |
| General Motors |
| Cresco Labs |
GM and Cresco Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Cresco Labs
The main advantage of trading using opposite GM and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cresco Labs 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 Cresco Labs will offset losses from the drop in Cresco Labs' long position.The idea behind General Motors and Cresco Labs 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.| Cresco Labs vs. Verano Holdings Corp | Cresco Labs vs. AYR Strategies Class | Cresco Labs vs. Green Thumb Industries | Cresco Labs vs. Marimed |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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