Correlation Between Absolute Health and Black Diamond

Can any of the company-specific risk be diversified away by investing in both Absolute Health 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 Absolute Health and Black Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absolute Health and and Black Diamond Group, you can compare the effects of market volatilities on Absolute Health 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 Absolute Health with a short position of Black Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Health and Black Diamond.

Diversification Opportunities for Absolute Health and Black Diamond

0.47

Correlation Coefficient

Absolute Health  Black Diamond

Very weak diversification

The 3 months correlation between Absolute and Black is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Health and and Black Diamond Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Group and Absolute Health 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 Absolute Health and 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 Group has no effect on the direction of Absolute Health i.e., Absolute Health and Black Diamond go up and down completely randomly.

Pair Corralation between Absolute Health and Black Diamond

Given the investment horizon of 90 days Absolute Health and is expected to under-perform the Black Diamond. In addition to that, Absolute Health is 6.78 times more volatile than Black Diamond Group. It trades about -0.13 of its total potential returns per unit of risk. Black Diamond Group is currently generating about 0.09 per unit of volatility. If you would invest  547.00  in Black Diamond Group on September 23, 2024 and sell it today you would earn a total of  106.00  from holding Black Diamond Group or generate 19.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.43%
Values	Daily Returns

Absolute Health and  vs.  Black Diamond Group

Absolute Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Black Diamond Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Diamond Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Absolute Health and Black Diamond

The main advantage of trading using opposite Absolute Health and Black Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Health 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 Absolute Health and and Black Diamond Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.