Correlation Between Cronos and Golden Entertainment

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

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

Diversification Opportunities for Cronos and Golden Entertainment

-0.74

Correlation Coefficient

Cronos  Golden Entertainment

Pay attention - limited upside

The 3 months correlation between Cronos and Golden is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment 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 Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Cronos i.e., Cronos and Golden Entertainment go up and down completely randomly.

Pair Corralation between Cronos and Golden Entertainment

Assuming the 90 days trading horizon Cronos is expected to under-perform the Golden Entertainment. In addition to that, Cronos is 2.25 times more volatile than Golden Entertainment. It trades about -0.03 of its total potential returns per unit of risk. Golden Entertainment is currently generating about -0.02 per unit of volatility. If you would invest  3,401  in Golden Entertainment on January 31, 2024 and sell it today you would lose (127.00) from holding Golden Entertainment or give up 3.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Cronos  vs.  Golden Entertainment

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.

Golden Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cronos and Golden Entertainment

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

The idea behind Cronos and Golden Entertainment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.