Correlation Between Nasdaq and Decibel Cannabis

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

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

Diversification Opportunities for Nasdaq and Decibel Cannabis

0.08

Correlation Coefficient

Nasdaq  Decibel Cannabis

Significant diversification

The 3 months correlation between Nasdaq and Decibel is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Decibel Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decibel Cannabis has no effect on the direction of Nasdaq i.e., Nasdaq and Decibel Cannabis go up and down completely randomly.

Pair Corralation between Nasdaq and Decibel Cannabis

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Decibel Cannabis. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 3.37 times less risky than Decibel Cannabis. The stock trades about -0.01 of its potential returns per unit of risk. The Decibel Cannabis is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Decibel Cannabis on December 26, 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 Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Nasdaq Inc  vs.  Decibel Cannabis

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Nasdaq and Decibel Cannabis

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

The idea behind Nasdaq Inc and Decibel Cannabis 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.