Correlation Between Flora Growth and Decibel Cannabis

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

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

Diversification Opportunities for Flora Growth and Decibel Cannabis

-0.62

Correlation Coefficient

Flora Growth  Decibel Cannabis

Excellent diversification

The 3 months correlation between Flora and Decibel is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Flora Growth Corp and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis and Flora Growth 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 Flora Growth Corp 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 Flora Growth i.e., Flora Growth and Decibel Cannabis go up and down completely randomly.

Pair Corralation between Flora Growth and Decibel Cannabis

Given the investment horizon of 90 days Flora Growth Corp is expected to under-perform the Decibel Cannabis. In addition to that, Flora Growth is 1.07 times more volatile than Decibel Cannabis. It trades about -0.01 of its total potential returns per unit of risk. Decibel Cannabis is currently generating about 0.01 per unit of volatility. If you would invest  5.32  in Decibel Cannabis on September 19, 2024 and sell it today you would lose (0.71) from holding Decibel Cannabis or give up 13.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Flora Growth Corp  vs.  Decibel Cannabis

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.

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.

Pair Trading with Flora Growth and Decibel Cannabis

The main advantage of trading using opposite Flora Growth and Decibel Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flora Growth 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 Flora Growth Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.