Correlation Between Choom Holdings and Cresco Labs

Can any of the company-specific risk be diversified away by investing in both Choom Holdings 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 Choom Holdings and Cresco Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Choom Holdings and Cresco Labs, you can compare the effects of market volatilities on Choom Holdings 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 Choom Holdings with a short position of Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choom Holdings and Cresco Labs.

Diversification Opportunities for Choom Holdings and Cresco Labs

0.34

Correlation Coefficient

Choom Holdings  Cresco Labs

Weak diversification

The 3 months correlation between Choom and Cresco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Choom Holdings and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs and Choom Holdings 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 Choom Holdings 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 Choom Holdings i.e., Choom Holdings and Cresco Labs go up and down completely randomly.

Pair Corralation between Choom Holdings and Cresco Labs

Assuming the 90 days horizon Choom Holdings is expected to under-perform the Cresco Labs. In addition to that, Choom Holdings is 2.12 times more volatile than Cresco Labs. It trades about -0.13 of its total potential returns per unit of risk. Cresco Labs is currently generating about -0.11 per unit of volatility. If you would invest  160.00  in Cresco Labs on September 20, 2024 and sell it today you would lose (65.00) from holding Cresco Labs or give up 40.62% of portfolio value over 90 days.

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

Choom Holdings  vs.  Cresco Labs

Choom Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choom Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cresco Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cresco Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Choom Holdings and Cresco Labs

The main advantage of trading using opposite Choom Holdings and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choom Holdings 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 Choom Holdings 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.