Correlation Between SNDL and Cronos
Can any of the company-specific risk be diversified away by investing in both SNDL 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 SNDL and Cronos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SNDL Inc and Cronos Group, you can compare the effects of market volatilities on SNDL 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 SNDL with a short position of Cronos. Check out your portfolio center. Please also check ongoing floating volatility patterns of SNDL and Cronos.
Diversification Opportunities for SNDL and Cronos
Very poor diversification
The 3 months correlation between SNDL and Cronos is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group and SNDL 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 SNDL Inc 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 SNDL i.e., SNDL and Cronos go up and down completely randomly.
Pair Corralation between SNDL and Cronos
Given the investment horizon of 90 days SNDL Inc is expected to under-perform the Cronos. In addition to that, SNDL is 1.58 times more volatile than Cronos Group. It trades about -0.21 of its total potential returns per unit of risk. Cronos Group is currently generating about -0.27 per unit of volatility. If you would invest 203.00 in Cronos Group on November 7, 2024 and sell it today you would lose (13.00) from holding Cronos Group or give up 6.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SNDL Inc vs. Cronos Group
Performance |
| Timeline |
| SNDL Inc |
| Cronos Group |
SNDL and Cronos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SNDL and Cronos
The main advantage of trading using opposite SNDL and Cronos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SNDL 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 SNDL Inc 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.| Cronos vs. OrganiGram Holdings | Cronos vs. Aurora Cannabis | Cronos vs. SNDL Inc | Cronos vs. Canopy Growth Corp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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