Correlation Between RIV Capital and Cresco Labs

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

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

Diversification Opportunities for RIV Capital and Cresco Labs

0.88

Correlation Coefficient

RIV Capital  Cresco Labs

Very poor diversification

The 3 months correlation between RIV and Cresco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding RIV Capital and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs and RIV Capital 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 RIV Capital 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 RIV Capital i.e., RIV Capital and Cresco Labs go up and down completely randomly.

Pair Corralation between RIV Capital and Cresco Labs

Assuming the 90 days horizon RIV Capital is expected to under-perform the Cresco Labs. In addition to that, RIV Capital is 1.34 times more volatile than Cresco Labs. It trades about -0.11 of its total potential returns per unit of risk. Cresco Labs is currently generating about -0.12 per unit of volatility. If you would invest  165.00  in Cresco Labs on September 19, 2024 and sell it today you would lose (70.00) from holding Cresco Labs or give up 42.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

RIV Capital  vs.  Cresco Labs

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital 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 RIV Capital and Cresco Labs

The main advantage of trading using opposite RIV Capital and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RIV Capital 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 RIV Capital 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.