Correlation Between Black Diamond and Solution Financial
Can any of the company-specific risk be diversified away by investing in both Black Diamond and Solution Financial 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 Black Diamond and Solution Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Diamond Group and Solution Financial, you can compare the effects of market volatilities on Black Diamond and Solution Financial 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 Black Diamond with a short position of Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Diamond and Solution Financial.
Diversification Opportunities for Black Diamond and Solution Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Solution is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Group and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial and Black Diamond 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 Black Diamond Group are associated (or correlated) with Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Black Diamond i.e., Black Diamond and Solution Financial go up and down completely randomly.
Pair Corralation between Black Diamond and Solution Financial
Assuming the 90 days horizon Black Diamond Group is expected to generate 0.65 times more return on investment than Solution Financial. However, Black Diamond Group is 1.54 times less risky than Solution Financial. It trades about 0.08 of its potential returns per unit of risk. Solution Financial is currently generating about 0.01 per unit of risk. If you would invest 355.00 in Black Diamond Group on August 24, 2024 and sell it today you would earn a total of 275.00 from holding Black Diamond Group or generate 77.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 74.6% |
| Values | Daily Returns |
Black Diamond Group vs. Solution Financial
Performance |
| Timeline |
| Black Diamond Group |
| Solution Financial |
Black Diamond and Solution Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Diamond and Solution Financial
The main advantage of trading using opposite Black Diamond and Solution Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Diamond position performs unexpectedly, Solution Financial 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 Solution Financial will offset losses from the drop in Solution Financial's long position.| Black Diamond vs. Element Solutions | Black Diamond vs. Orion Engineered Carbons | Black Diamond vs. Minerals Technologies | Black Diamond vs. Ingevity Corp |
| Solution Financial vs. Ashtead Group plc | Solution Financial vs. African Discovery Group | Solution Financial vs. Emeco Holdings Limited | Solution Financial vs. BOC Aviation Limited |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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