Correlation Between Decibel Cannabis and Lifeist Wellness

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

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

Diversification Opportunities for Decibel Cannabis and Lifeist Wellness

-0.49

Correlation Coefficient

Decibel Cannabis  Lifeist Wellness

Very good diversification

The 3 months correlation between Decibel and Lifeist is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Lifeist Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeist Wellness 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 Lifeist Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeist Wellness has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Lifeist Wellness go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Lifeist Wellness

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 7.96 times less return on investment than Lifeist Wellness. But when comparing it to its historical volatility, Decibel Cannabis is 3.15 times less risky than Lifeist Wellness. It trades about 0.02 of its potential returns per unit of risk. Lifeist Wellness is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  120.00  in Lifeist Wellness on September 17, 2024 and sell it today you would lose (115.50) from holding Lifeist Wellness or give up 96.25% of portfolio value over 90 days.

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

Decibel Cannabis  vs.  Lifeist Wellness

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.

Lifeist Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifeist Wellness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Decibel Cannabis and Lifeist Wellness

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

The idea behind Decibel Cannabis and Lifeist Wellness 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.