Correlation Between Decibel Cannabis and BZAM

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

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

Diversification Opportunities for Decibel Cannabis and BZAM

-0.11

Correlation Coefficient

Decibel Cannabis  BZAM

Good diversification

The 3 months correlation between Decibel and BZAM is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and BZAM go up and down completely randomly.

Pair Corralation between Decibel Cannabis and BZAM

Assuming the 90 days horizon Decibel Cannabis is expected to generate 371.23 times less return on investment than BZAM. But when comparing it to its historical volatility, Decibel Cannabis is 22.47 times less risky than BZAM. It trades about 0.01 of its potential returns per unit of risk. BZAM is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.40  in BZAM on September 20, 2024 and sell it today you would lose (1.40) from holding BZAM or give up 100.0% of portfolio value over 90 days.

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

Decibel Cannabis  vs.  BZAM

Decibel Cannabis

Risk-Adjusted Performance

0 of 100

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.

BZAM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Decibel Cannabis and BZAM

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

The idea behind Decibel Cannabis and BZAM 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.