Correlation Between Decibel Cannabis and Medicure

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

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

Diversification Opportunities for Decibel Cannabis and Medicure

-0.33

Correlation Coefficient

Decibel Cannabis  Medicure

Very good diversification

The 3 months correlation between Decibel and Medicure is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure 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 Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Medicure go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Medicure

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 1.04 times more return on investment than Medicure. However, Decibel Cannabis is 1.04 times more volatile than Medicure. It trades about 0.0 of its potential returns per unit of risk. Medicure is currently generating about -0.01 per unit of risk. If you would invest  7.00  in Decibel Cannabis on December 29, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Decibel Cannabis  vs.  Medicure

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.

Medicure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Medicure is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Decibel Cannabis and Medicure

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

The idea behind Decibel Cannabis and Medicure 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.