Correlation Between Amotiv and Decibel Cannabis

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

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

Diversification Opportunities for Amotiv and Decibel Cannabis

-0.6

Correlation Coefficient

Amotiv  Decibel Cannabis

Excellent diversification

The 3 months correlation between Amotiv and Decibel is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Amotiv Limited and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis and Amotiv 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 Amotiv Limited are associated (or correlated) with Decibel Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decibel Cannabis has no effect on the direction of Amotiv i.e., Amotiv and Decibel Cannabis go up and down completely randomly.

Pair Corralation between Amotiv and Decibel Cannabis

Assuming the 90 days trading horizon Amotiv is expected to generate 10.45 times less return on investment than Decibel Cannabis. But when comparing it to its historical volatility, Amotiv Limited is 4.27 times less risky than Decibel Cannabis. It trades about 0.01 of its potential returns per unit of risk. Decibel Cannabis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Decibel Cannabis on September 28, 2024 and sell it today you would lose (4.50) from holding Decibel Cannabis or give up 37.5% of portfolio value over 90 days.

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

Amotiv Limited  vs.  Decibel Cannabis

Amotiv Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amotiv Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Decibel Cannabis

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Decibel Cannabis are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Decibel Cannabis showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amotiv and Decibel Cannabis

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

The idea behind Amotiv Limited and Decibel Cannabis 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.