Correlation Between Blackline and Shotspotter

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

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

Diversification Opportunities for Blackline and Shotspotter

-0.68

Correlation Coefficient

Blackline  Shotspotter

Excellent diversification

The 3 months correlation between Blackline and Shotspotter is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Blackline and Shotspotter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shotspotter 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 Shotspotter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shotspotter has no effect on the direction of Blackline i.e., Blackline and Shotspotter go up and down completely randomly.

Pair Corralation between Blackline and Shotspotter

Allowing for the 90-day total investment horizon Blackline is expected to under-perform the Shotspotter. But the stock apears to be less risky and, when comparing its historical volatility, Blackline is 1.54 times less risky than Shotspotter. The stock trades about -0.1 of its potential returns per unit of risk. The Shotspotter is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,285  in Shotspotter on December 30, 2024 and sell it today you would earn a total of  459.00  from holding Shotspotter or generate 35.72% return on investment over 90 days.

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

Blackline  vs.  Shotspotter

Blackline

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Shotspotter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shotspotter are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Shotspotter demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackline and Shotspotter

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

The idea behind Blackline and Shotspotter 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.