Correlation Between Medipharm Labs and Decibel Cannabis

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

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

Diversification Opportunities for Medipharm Labs and Decibel Cannabis

-0.47

Correlation Coefficient

Medipharm Labs  Decibel Cannabis

Very good diversification

The 3 months correlation between Medipharm and Decibel is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Medipharm Labs Corp and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis and Medipharm Labs 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 Medipharm Labs 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 Medipharm Labs i.e., Medipharm Labs and Decibel Cannabis go up and down completely randomly.

Pair Corralation between Medipharm Labs and Decibel Cannabis

Assuming the 90 days horizon Medipharm Labs Corp is expected to under-perform the Decibel Cannabis. But the otc stock apears to be less risky and, when comparing its historical volatility, Medipharm Labs Corp is 2.28 times less risky than Decibel Cannabis. The otc stock trades about -0.03 of its potential returns per unit of risk. The Decibel Cannabis is currently generating about 0.01 of returns per unit of risk over similar time horizon. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Medipharm Labs Corp  vs.  Decibel Cannabis

Medipharm Labs Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medipharm Labs Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Medipharm Labs and Decibel Cannabis

The main advantage of trading using opposite Medipharm Labs and Decibel Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medipharm Labs 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 Medipharm Labs 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.