Correlation Between Black Diamond and Alector

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

By analyzing existing cross correlation between Black Diamond Therapeutics and Alector, you can compare the effects of market volatilities on Black Diamond and Alector 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 Alector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Diamond and Alector.

Diversification Opportunities for Black Diamond and Alector

0.33

Correlation Coefficient

Black Diamond  Alector

Weak diversification

The 3 months correlation between Black and Alector is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Therapeutics and Alector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alector 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 Therapeutics are associated (or correlated) with Alector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alector has no effect on the direction of Black Diamond i.e., Black Diamond and Alector go up and down completely randomly.

Pair Corralation between Black Diamond and Alector

Given the investment horizon of 90 days Black Diamond Therapeutics is expected to generate 1.23 times more return on investment than Alector. However, Black Diamond is 1.23 times more volatile than Alector. It trades about -0.07 of its potential returns per unit of risk. Alector is currently generating about -0.15 per unit of risk. If you would invest  265.00  in Black Diamond Therapeutics on November 29, 2024 and sell it today you would lose (62.00) from holding Black Diamond Therapeutics or give up 23.4% of portfolio value over 90 days.

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

Black Diamond Therapeutics  vs.  Alector

Black Diamond Therap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Diamond Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Alector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Black Diamond and Alector

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

The idea behind Black Diamond Therapeutics and Alector 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..