Correlation Between Decibel Cannabis and Medipharm Labs

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

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

Diversification Opportunities for Decibel Cannabis and Medipharm Labs

-0.33

Correlation Coefficient

Decibel Cannabis  Medipharm Labs

Very good diversification

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

Pair Corralation between Decibel Cannabis and Medipharm Labs

Assuming the 90 days horizon Decibel Cannabis is expected to generate 12.9 times less return on investment than Medipharm Labs. In addition to that, Decibel Cannabis is 1.04 times more volatile than Medipharm Labs Corp. It trades about 0.01 of its total potential returns per unit of risk. Medipharm Labs Corp is currently generating about 0.15 per unit of volatility. If you would invest  4.44  in Medipharm Labs Corp on December 30, 2024 and sell it today you would earn a total of  2.46  from holding Medipharm Labs Corp or generate 55.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Decibel Cannabis  vs.  Medipharm Labs Corp

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. Despite nearly stable fundamental indicators, Decibel Cannabis is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Medipharm Labs Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medipharm Labs Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Medipharm Labs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Decibel Cannabis and Medipharm Labs

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

The idea behind Decibel Cannabis and Medipharm Labs Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.