Correlation Between Cresco Labs and Marimed

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

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

Diversification Opportunities for Cresco Labs and Marimed

0.59

Correlation Coefficient

Cresco Labs  Marimed

Very weak diversification

The 3 months correlation between Cresco and Marimed is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cresco Labs and Marimed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marimed 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 Marimed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marimed has no effect on the direction of Cresco Labs i.e., Cresco Labs and Marimed go up and down completely randomly.

Pair Corralation between Cresco Labs and Marimed

Assuming the 90 days horizon Cresco Labs is expected to under-perform the Marimed. In addition to that, Cresco Labs is 1.41 times more volatile than Marimed. It trades about -0.08 of its total potential returns per unit of risk. Marimed is currently generating about -0.01 per unit of volatility. If you would invest  16.00  in Marimed on September 3, 2024 and sell it today you would lose (1.00) from holding Marimed or give up 6.25% of portfolio value over 90 days.

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

Cresco Labs  vs.  Marimed

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.

Marimed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marimed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Marimed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cresco Labs and Marimed

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

The idea behind Cresco Labs and Marimed 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.