Correlation Between Decibel Cannabis and Bausch Health

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

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

Diversification Opportunities for Decibel Cannabis and Bausch Health

0.15

Correlation Coefficient

Decibel Cannabis  Bausch Health

Average diversification

The 3 months correlation between Decibel and Bausch is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies 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 Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Bausch Health go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Bausch Health

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 1.69 times more return on investment than Bausch Health. However, Decibel Cannabis is 1.69 times more volatile than Bausch Health Companies. It trades about 0.0 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.08 per unit of risk. If you would invest  7.00  in Decibel Cannabis on December 30, 2024 and sell it today you would lose (0.50) from holding Decibel Cannabis or give up 7.14% 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.  Bausch Health Companies

Decibel Cannabis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Decibel Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Bausch Health Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Decibel Cannabis and Bausch Health

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

The idea behind Decibel Cannabis and Bausch Health Companies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.