Correlation Between Cronos and SolarEdge Technologies

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

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

Diversification Opportunities for Cronos and SolarEdge Technologies

-0.3

Correlation Coefficient

Cronos  SolarEdge Technologies

Very good diversification

The 3 months correlation between Cronos and SolarEdge is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies and Cronos 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 Cronos are associated (or correlated) with SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of Cronos i.e., Cronos and SolarEdge Technologies go up and down completely randomly.

Pair Corralation between Cronos and SolarEdge Technologies

Assuming the 90 days trading horizon Cronos is expected to generate 1.17 times more return on investment than SolarEdge Technologies. However, Cronos is 1.17 times more volatile than SolarEdge Technologies. It trades about 0.01 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about -0.04 per unit of risk. If you would invest  19.00  in Cronos on January 30, 2024 and sell it today you would lose (6.00) from holding Cronos or give up 31.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.5%
Values	Daily Returns

Cronos  vs.  SolarEdge Technologies

Cronos

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

SolarEdge Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolarEdge Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cronos and SolarEdge Technologies

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

The idea behind Cronos and SolarEdge Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..