Correlation Between CHEVRON CDR and Decibel Cannabis

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

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

Diversification Opportunities for CHEVRON CDR and Decibel Cannabis

-0.27

Correlation Coefficient

CHEVRON CDR  Decibel Cannabis

Very good diversification

The 3 months correlation between CHEVRON and Decibel is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding CHEVRON CDR and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis and CHEVRON CDR 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 CHEVRON CDR 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 CHEVRON CDR i.e., CHEVRON CDR and Decibel Cannabis go up and down completely randomly.

Pair Corralation between CHEVRON CDR and Decibel Cannabis

Assuming the 90 days trading horizon CHEVRON CDR is expected to generate 0.17 times more return on investment than Decibel Cannabis. However, CHEVRON CDR is 5.93 times less risky than Decibel Cannabis. It trades about -0.03 of its potential returns per unit of risk. Decibel Cannabis is currently generating about -0.06 per unit of risk. If you would invest  2,135  in CHEVRON CDR on July 7, 2024 and sell it today you would lose (117.00) from holding CHEVRON CDR or give up 5.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CHEVRON CDR  vs.  Decibel Cannabis

CHEVRON CDR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Decibel Cannabis

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Decibel Cannabis are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Decibel Cannabis may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with CHEVRON CDR and Decibel Cannabis

The main advantage of trading using opposite CHEVRON CDR and Decibel Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHEVRON CDR 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 CHEVRON CDR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.