Correlation Between Black Diamond and ProKidney Corp

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

Diversification Opportunities for Black Diamond and ProKidney Corp

0.09

Correlation Coefficient

Black Diamond  ProKidney Corp

Significant diversification

The 3 months correlation between Black and ProKidney is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Therapeutics and ProKidney Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProKidney Corp 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 ProKidney Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProKidney Corp has no effect on the direction of Black Diamond i.e., Black Diamond and ProKidney Corp go up and down completely randomly.

Pair Corralation between Black Diamond and ProKidney Corp

Given the investment horizon of 90 days Black Diamond Therapeutics is expected to under-perform the ProKidney Corp. But the stock apears to be less risky and, when comparing its historical volatility, Black Diamond Therapeutics is 1.62 times less risky than ProKidney Corp. The stock trades about -0.08 of its potential returns per unit of risk. The ProKidney Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  209.00  in ProKidney Corp on October 12, 2024 and sell it today you would lose (51.00) from holding ProKidney Corp or give up 24.4% of portfolio value over 90 days.

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

Black Diamond Therapeutics  vs.  ProKidney Corp

Black Diamond Therap

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ProKidney Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ProKidney Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ProKidney Corp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Black Diamond and ProKidney Corp

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

The idea behind Black Diamond Therapeutics and ProKidney Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.