Correlation Between Black Diamond and Sekisui House

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

Diversification Opportunities for Black Diamond and Sekisui House

0.94

Correlation Coefficient

Black Diamond  Sekisui House

Almost no diversification

The 3 months correlation between Black and Sekisui is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Group and Sekisui House Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House 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 Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of Black Diamond i.e., Black Diamond and Sekisui House go up and down completely randomly.

Pair Corralation between Black Diamond and Sekisui House

Assuming the 90 days horizon Black Diamond Group is expected to generate 1.09 times more return on investment than Sekisui House. However, Black Diamond is 1.09 times more volatile than Sekisui House Ltd. It trades about -0.04 of its potential returns per unit of risk. Sekisui House Ltd is currently generating about -0.12 per unit of risk. If you would invest  695.00  in Black Diamond Group on September 14, 2024 and sell it today you would lose (34.00) from holding Black Diamond Group or give up 4.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Black Diamond Group  vs.  Sekisui House Ltd

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 nearly stable primary indicators, Black Diamond is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Black Diamond and Sekisui House

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

The idea behind Black Diamond Group and Sekisui House Ltd 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..