Correlation Between Black Diamond and BOC Aviation

Can any of the company-specific risk be diversified away by investing in both Black Diamond and BOC Aviation 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 BOC Aviation 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 BOC Aviation Limited, you can compare the effects of market volatilities on Black Diamond and BOC Aviation 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 BOC Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Diamond and BOC Aviation.

Diversification Opportunities for Black Diamond and BOC Aviation

0.67

Correlation Coefficient

Black Diamond  BOC Aviation

Poor diversification

The 3 months correlation between Black and BOC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Group and BOC Aviation Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Aviation Limited 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 BOC Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Aviation Limited has no effect on the direction of Black Diamond i.e., Black Diamond and BOC Aviation go up and down completely randomly.

Pair Corralation between Black Diamond and BOC Aviation

Assuming the 90 days horizon Black Diamond Group is expected to generate 0.68 times more return on investment than BOC Aviation. However, Black Diamond Group is 1.48 times less risky than BOC Aviation. It trades about -0.15 of its potential returns per unit of risk. BOC Aviation Limited is currently generating about -0.1 per unit of risk. If you would invest  753.00  in Black Diamond Group on September 3, 2024 and sell it today you would lose (119.00) from holding Black Diamond Group or give up 15.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Black Diamond Group  vs.  BOC Aviation Limited

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 fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BOC Aviation Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOC Aviation Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Black Diamond and BOC Aviation

The main advantage of trading using opposite Black Diamond and BOC Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Diamond position performs unexpectedly, BOC Aviation 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 BOC Aviation will offset losses from the drop in BOC Aviation's long position.

The idea behind Black Diamond Group and BOC Aviation Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.