Correlation Between Black Widow and Fortune Bay
Can any of the company-specific risk be diversified away by investing in both Black Widow and Fortune Bay 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 Widow and Fortune Bay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Widow Resources and Fortune Bay Corp, you can compare the effects of market volatilities on Black Widow and Fortune Bay 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 Widow with a short position of Fortune Bay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Widow and Fortune Bay.
Diversification Opportunities for Black Widow and Fortune Bay
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Black and Fortune is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Black Widow Resources and Fortune Bay Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Bay Corp and Black Widow 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 Widow Resources are associated (or correlated) with Fortune Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Bay Corp has no effect on the direction of Black Widow i.e., Black Widow and Fortune Bay go up and down completely randomly.
Pair Corralation between Black Widow and Fortune Bay
Assuming the 90 days horizon Black Widow Resources is expected to generate 1.65 times more return on investment than Fortune Bay. However, Black Widow is 1.65 times more volatile than Fortune Bay Corp. It trades about 0.02 of its potential returns per unit of risk. Fortune Bay Corp is currently generating about 0.01 per unit of risk. If you would invest 3.50 in Black Widow Resources on August 30, 2024 and sell it today you would lose (2.50) from holding Black Widow Resources or give up 71.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Widow Resources vs. Fortune Bay Corp
Performance |
| Timeline |
| Black Widow Resources |
| Fortune Bay Corp |
Black Widow and Fortune Bay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Widow and Fortune Bay
The main advantage of trading using opposite Black Widow and Fortune Bay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Widow position performs unexpectedly, Fortune Bay 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 Fortune Bay will offset losses from the drop in Fortune Bay's long position.| Black Widow vs. First Majestic Silver | Black Widow vs. Ivanhoe Energy | Black Widow vs. Orezone Gold Corp | Black Widow vs. Faraday Copper Corp |
| Fortune Bay vs. First Majestic Silver | Fortune Bay vs. Ivanhoe Energy | Fortune Bay vs. Orezone Gold Corp | Fortune Bay vs. Faraday Copper Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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