Correlation Between Blackstone Loan and Litigation Capital

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

By analyzing existing cross correlation between Blackstone Loan Financing and Litigation Capital Management, you can compare the effects of market volatilities on Blackstone Loan and Litigation Capital 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 Blackstone Loan with a short position of Litigation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackstone Loan and Litigation Capital.

Diversification Opportunities for Blackstone Loan and Litigation Capital

-0.23

Correlation Coefficient

Blackstone Loan  Litigation Capital

Very good diversification

The 3 months correlation between Blackstone and Litigation is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Blackstone Loan Financing and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital and Blackstone Loan 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 Blackstone Loan Financing are associated (or correlated) with Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of Blackstone Loan i.e., Blackstone Loan and Litigation Capital go up and down completely randomly.

Pair Corralation between Blackstone Loan and Litigation Capital

Assuming the 90 days trading horizon Blackstone Loan is expected to generate 6.83 times less return on investment than Litigation Capital. But when comparing it to its historical volatility, Blackstone Loan Financing is 2.23 times less risky than Litigation Capital. It trades about 0.01 of its potential returns per unit of risk. Litigation Capital Management is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,875  in Litigation Capital Management on October 10, 2024 and sell it today you would earn a total of  3,125  from holding Litigation Capital Management or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Blackstone Loan Financing  vs.  Litigation Capital Management

Blackstone Loan Financing

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Loan Financing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Blackstone Loan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Litigation Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litigation Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Blackstone Loan and Litigation Capital

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

The idea behind Blackstone Loan Financing and Litigation Capital Management 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.