Correlation Between Decibel Cannabis and Simply Better

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

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

Diversification Opportunities for Decibel Cannabis and Simply Better

0.17

Correlation Coefficient

Decibel Cannabis  Simply Better

Average diversification

The 3 months correlation between Decibel and Simply is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Simply Better Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Better Brands 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 Simply Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Better Brands has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Simply Better go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Simply Better

Given the investment horizon of 90 days Decibel Cannabis is expected to generate 2.87 times less return on investment than Simply Better. In addition to that, Decibel Cannabis is 1.26 times more volatile than Simply Better Brands. It trades about 0.02 of its total potential returns per unit of risk. Simply Better Brands is currently generating about 0.08 per unit of volatility. If you would invest  23.00  in Simply Better Brands on September 19, 2024 and sell it today you would earn a total of  78.00  from holding Simply Better Brands or generate 339.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Decibel Cannabis  vs.  Simply Better Brands

Decibel Cannabis

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Decibel Cannabis are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Decibel Cannabis may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Simply Better Brands

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Better Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Simply Better showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Decibel Cannabis and Simply Better

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

The idea behind Decibel Cannabis and Simply Better Brands 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.