Correlation Between Decibel Cannabis and Aurora Cannabis

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

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

Diversification Opportunities for Decibel Cannabis and Aurora Cannabis

0.14

Correlation Coefficient

Decibel Cannabis  Aurora Cannabis

Average diversification

The 3 months correlation between Decibel and Aurora is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and Decibel Cannabis 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 Decibel Cannabis are associated (or correlated) with Aurora Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Cannabis has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Aurora Cannabis go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Aurora Cannabis

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 1.58 times more return on investment than Aurora Cannabis. However, Decibel Cannabis is 1.58 times more volatile than Aurora Cannabis. It trades about -0.11 of its potential returns per unit of risk. Aurora Cannabis is currently generating about -0.6 per unit of risk. If you would invest  8.00  in Decibel Cannabis on December 10, 2024 and sell it today you would lose (1.00) from holding Decibel Cannabis or give up 12.5% of portfolio value over 90 days.

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

Decibel Cannabis  vs.  Aurora Cannabis

Decibel Cannabis

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Decibel Cannabis are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Decibel Cannabis is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aurora Cannabis

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Cannabis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Aurora Cannabis displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Decibel Cannabis and Aurora Cannabis

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

The idea behind Decibel Cannabis and Aurora 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.