Correlation Between Ford and Black Diamond
Can any of the company-specific risk be diversified away by investing in both Ford and Black Diamond 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 Ford and Black Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Black Diamond Therapeutics, you can compare the effects of market volatilities on Ford and Black Diamond 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 Ford with a short position of Black Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Black Diamond.
Diversification Opportunities for Ford and Black Diamond
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Black is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Black Diamond Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Therap and Ford 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 Ford Motor are associated (or correlated) with Black Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Diamond Therap has no effect on the direction of Ford i.e., Ford and Black Diamond go up and down completely randomly.
Pair Corralation between Ford and Black Diamond
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Black Diamond. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 5.37 times less risky than Black Diamond. The stock trades about 0.0 of its potential returns per unit of risk. The Black Diamond Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 149.00 in Black Diamond Therapeutics on January 6, 2025 and sell it today you would lose (9.00) from holding Black Diamond Therapeutics or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Black Diamond Therapeutics
Performance |
| Timeline |
| Ford Motor |
| Black Diamond Therap |
Ford and Black Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Black Diamond
The main advantage of trading using opposite Ford and Black Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Black Diamond 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 Black Diamond will offset losses from the drop in Black Diamond's long position.The idea behind Ford Motor and Black Diamond Therapeutics 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.| Black Diamond vs. Passage Bio | Black Diamond vs. Alector | Black Diamond vs. Revolution Medicines | Black Diamond vs. Stoke Therapeutics |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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