Correlation Between Black Diamond and Solution Financial

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

Diversification Opportunities for Black Diamond and Solution Financial

0.69

Correlation Coefficient

Black Diamond  Solution Financial

Poor diversification

The 3 months correlation between Black and Solution is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Group and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Black Diamond i.e., Black Diamond and Solution Financial go up and down completely randomly.

Pair Corralation between Black Diamond and Solution Financial

Assuming the 90 days horizon Black Diamond Group is expected to under-perform the Solution Financial. But the otc stock apears to be less risky and, when comparing its historical volatility, Black Diamond Group is 1.29 times less risky than Solution Financial. The otc stock trades about -0.15 of its potential returns per unit of risk. The Solution Financial is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Solution Financial on September 3, 2024 and sell it today you would lose (3.00) from holding Solution Financial or give up 13.04% of portfolio value over 90 days.

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

Black Diamond Group  vs.  Solution Financial

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.

Solution Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental 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 Black Diamond and Solution Financial

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

The idea behind Black Diamond Group and Solution Financial 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 CEOs Directory module to screen CEOs from public companies around the world.