Correlation Between Cresco Labs and BZAM

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

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

Diversification Opportunities for Cresco Labs and BZAM

0.56

Correlation Coefficient

Cresco Labs  BZAM

Very weak diversification

The 3 months correlation between Cresco and BZAM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cresco Labs and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM and Cresco Labs 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 Cresco Labs are associated (or correlated) with BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Cresco Labs i.e., Cresco Labs and BZAM go up and down completely randomly.

Pair Corralation between Cresco Labs and BZAM

Assuming the 90 days horizon Cresco Labs is expected to generate 154.79 times less return on investment than BZAM. But when comparing it to its historical volatility, Cresco Labs is 11.97 times less risky than BZAM. It trades about 0.0 of its potential returns per unit of risk. BZAM is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  26.00  in BZAM on September 20, 2024 and sell it today you would lose (26.00) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Cresco Labs  vs.  BZAM

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.

BZAM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cresco Labs and BZAM

The main advantage of trading using opposite Cresco Labs and BZAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cresco Labs position performs unexpectedly, BZAM 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 BZAM will offset losses from the drop in BZAM's long position.

The idea behind Cresco Labs and BZAM 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.