Correlation Between Cresco Labs and Stem Holdings

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

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

Diversification Opportunities for Cresco Labs and Stem Holdings

0.0

Correlation Coefficient

Cresco Labs  Stem Holdings

Pay attention - limited upside

The 3 months correlation between Cresco and Stem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cresco Labs and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings 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 Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of Cresco Labs i.e., Cresco Labs and Stem Holdings go up and down completely randomly.

Pair Corralation between Cresco Labs and Stem Holdings

Assuming the 90 days horizon Cresco Labs is expected to under-perform the Stem Holdings. But the otc stock apears to be less risky and, when comparing its historical volatility, Cresco Labs is 13.3 times less risky than Stem Holdings. The otc stock trades about 0.0 of its potential returns per unit of risk. The Stem Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Stem Holdings on September 19, 2024 and sell it today you would earn a total of  0.70  from holding Stem Holdings or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cresco Labs  vs.  Stem Holdings

Cresco Labs

Risk-Adjusted Performance

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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.

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Stem Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cresco Labs and Stem Holdings

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

The idea behind Cresco Labs and Stem Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.