Correlation Between Blackline and Ichor Holdings

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

By analyzing existing cross correlation between Blackline and Ichor Holdings, you can compare the effects of market volatilities on Blackline and Ichor Holdings 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 Blackline with a short position of Ichor Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackline and Ichor Holdings.

Diversification Opportunities for Blackline and Ichor Holdings

0.75

Correlation Coefficient

Blackline  Ichor Holdings

Poor diversification

The 3 months correlation between Blackline and Ichor is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Blackline and Ichor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ichor Holdings and Blackline 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 Blackline are associated (or correlated) with Ichor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ichor Holdings has no effect on the direction of Blackline i.e., Blackline and Ichor Holdings go up and down completely randomly.

Pair Corralation between Blackline and Ichor Holdings

Allowing for the 90-day total investment horizon Blackline is expected to generate 1.03 times less return on investment than Ichor Holdings. But when comparing it to its historical volatility, Blackline is 1.95 times less risky than Ichor Holdings. It trades about 0.12 of its potential returns per unit of risk. Ichor Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,059  in Ichor Holdings on October 8, 2024 and sell it today you would earn a total of  324.50  from holding Ichor Holdings or generate 10.61% return on investment over 90 days.

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

Blackline  vs.  Ichor Holdings

Blackline

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Blackline disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ichor Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ichor Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, Ichor Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackline and Ichor Holdings

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

The idea behind Blackline and Ichor Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.