Correlation Between Blackline and Blackbaud
Can any of the company-specific risk be diversified away by investing in both Blackline and Blackbaud 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 Blackline and Blackbaud into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackline and Blackbaud, you can compare the effects of market volatilities on Blackline and Blackbaud 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 Blackline with a short position of Blackbaud. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackline and Blackbaud.
Diversification Opportunities for Blackline and Blackbaud
Weak diversification
The 3 months correlation between Blackline and Blackbaud is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Blackline and Blackbaud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackbaud and Blackline 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 Blackline are associated (or correlated) with Blackbaud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackbaud has no effect on the direction of Blackline i.e., Blackline and Blackbaud go up and down completely randomly.
Pair Corralation between Blackline and Blackbaud
Allowing for the 90-day total investment horizon Blackline is expected to generate 1.02 times less return on investment than Blackbaud. In addition to that, Blackline is 1.11 times more volatile than Blackbaud. It trades about 0.03 of its total potential returns per unit of risk. Blackbaud is currently generating about 0.03 per unit of volatility. If you would invest 8,092 in Blackbaud on August 28, 2024 and sell it today you would earn a total of 655.00 from holding Blackbaud or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blackline vs. Blackbaud
Performance |
| Timeline |
| Blackline |
| Blackbaud |
Blackline and Blackbaud Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blackline and Blackbaud
The main advantage of trading using opposite Blackline and Blackbaud positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackline position performs unexpectedly, Blackbaud 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 Blackbaud will offset losses from the drop in Blackbaud's long position.The idea behind Blackline and Blackbaud 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.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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