Correlation Between Blackbaud and PDF Solutions

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

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

Diversification Opportunities for Blackbaud and PDF Solutions

0.91

Correlation Coefficient

Blackbaud  PDF Solutions

Almost no diversification

The 3 months correlation between Blackbaud and PDF is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Blackbaud and PDF Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDF Solutions and Blackbaud 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 Blackbaud are associated (or correlated) with PDF Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDF Solutions has no effect on the direction of Blackbaud i.e., Blackbaud and PDF Solutions go up and down completely randomly.

Pair Corralation between Blackbaud and PDF Solutions

Given the investment horizon of 90 days Blackbaud is expected to generate 0.54 times more return on investment than PDF Solutions. However, Blackbaud is 1.86 times less risky than PDF Solutions. It trades about -0.13 of its potential returns per unit of risk. PDF Solutions is currently generating about -0.12 per unit of risk. If you would invest  7,380  in Blackbaud on December 28, 2024 and sell it today you would lose (1,148) from holding Blackbaud or give up 15.56% of portfolio value over 90 days.

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

Blackbaud  vs.  PDF Solutions

Blackbaud

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackbaud has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PDF Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days PDF Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Blackbaud and PDF Solutions

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

The idea behind Blackbaud and PDF Solutions 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.