Correlation Between Decibel Cannabis and Brookfield

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

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

Diversification Opportunities for Decibel Cannabis and Brookfield

0.03

Correlation Coefficient

Decibel Cannabis  Brookfield

Significant diversification

The 3 months correlation between Decibel and Brookfield is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Brookfield go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Brookfield

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 10.76 times more return on investment than Brookfield. However, Decibel Cannabis is 10.76 times more volatile than Brookfield. It trades about 0.04 of its potential returns per unit of risk. Brookfield is currently generating about 0.08 per unit of risk. If you would invest  7.00  in Decibel Cannabis on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Decibel Cannabis or generate 0.0% return on investment over 90 days.

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

Decibel Cannabis  vs.  Brookfield

Decibel Cannabis

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Decibel Cannabis are ranked lower than 2 (%) 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.

Brookfield

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Decibel Cannabis and Brookfield

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

The idea behind Decibel Cannabis and Brookfield 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.