Correlation Between GM and Decibel Cannabis
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Decibel Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Decibel Cannabis, you can compare the effects of market volatilities on GM 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 GM with a short position of Decibel Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Decibel Cannabis.
Diversification Opportunities for GM and Decibel Cannabis
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Decibel is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis and GM 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 General Motors 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 GM i.e., GM and Decibel Cannabis go up and down completely randomly.
Pair Corralation between GM and Decibel Cannabis
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.28 times more return on investment than Decibel Cannabis. However, General Motors is 3.53 times less risky than Decibel Cannabis. It trades about 0.11 of its potential returns per unit of risk. Decibel Cannabis is currently generating about 0.0 per unit of risk. If you would invest 3,324 in General Motors on September 2, 2024 and sell it today you would earn a total of 2,235 from holding General Motors or generate 67.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Decibel Cannabis
Performance |
| Timeline |
| General Motors |
| Decibel Cannabis |
GM and Decibel Cannabis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Decibel Cannabis
The main advantage of trading using opposite GM and Decibel Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Decibel Cannabis vs. iShares Canadian HYBrid | Decibel Cannabis vs. Altagas Cum Red | Decibel Cannabis vs. European Residential Real | Decibel Cannabis vs. iShares Fundamental Hedged |
Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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