Crossfades can be created two ways:
Select only the first (!) of the two regions you want to crossfade. In the parameter box on the left side of the Arrange window, you see a “Fade Out” entry. Click on the boxed “Out” and pick “X” instead. Now click-drag up/down just right of the X to create a crossfade.
From the Arrange window’s toolbox, pick the crossfade tool (looks like “<" in a box) and click-drag across the boundary of two regions.