Correlation Between Decibel Cannabis and OrganiGram Holdings

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

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

Diversification Opportunities for Decibel Cannabis and OrganiGram Holdings

-0.24

Correlation Coefficient

Decibel Cannabis  OrganiGram Holdings

Very good diversification

The 3 months correlation between Decibel and OrganiGram is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and OrganiGram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OrganiGram Holdings 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 OrganiGram Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OrganiGram Holdings has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and OrganiGram Holdings go up and down completely randomly.

Pair Corralation between Decibel Cannabis and OrganiGram Holdings

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 2.23 times more return on investment than OrganiGram Holdings. However, Decibel Cannabis is 2.23 times more volatile than OrganiGram Holdings. It trades about 0.08 of its potential returns per unit of risk. OrganiGram Holdings is currently generating about 0.04 per unit of risk. If you would invest  6.50  in Decibel Cannabis on September 17, 2024 and sell it today you would earn a total of  0.50  from holding Decibel Cannabis or generate 7.69% return on investment over 90 days.

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

Decibel Cannabis  vs.  OrganiGram Holdings

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.

OrganiGram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OrganiGram Holdings 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 forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Decibel Cannabis and OrganiGram Holdings

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

The idea behind Decibel Cannabis and OrganiGram Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.