Correlation Between Decibel Cannabis and Flora Growth

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

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

Diversification Opportunities for Decibel Cannabis and Flora Growth

-0.62

Correlation Coefficient

Decibel Cannabis  Flora Growth

Excellent diversification

The 3 months correlation between Decibel and Flora is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Cannabis and Flora Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flora Growth 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 Flora Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flora Growth Corp has no effect on the direction of Decibel Cannabis i.e., Decibel Cannabis and Flora Growth go up and down completely randomly.

Pair Corralation between Decibel Cannabis and Flora Growth

Assuming the 90 days horizon Decibel Cannabis is expected to generate 0.59 times more return on investment than Flora Growth. However, Decibel Cannabis is 1.7 times less risky than Flora Growth. It trades about 0.05 of its potential returns per unit of risk. Flora Growth Corp is currently generating about -0.01 per unit of risk. If you would invest  4.46  in Decibel Cannabis on September 19, 2024 and sell it today you would earn a total of  0.15  from holding Decibel Cannabis or generate 3.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Decibel Cannabis  vs.  Flora Growth Corp

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.

Flora Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flora Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Flora Growth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Decibel Cannabis and Flora Growth

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

The idea behind Decibel Cannabis and Flora Growth 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.