Correlation Between Blackbaud and TomTom NV

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

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

Diversification Opportunities for Blackbaud and TomTom NV

0.75

Correlation Coefficient

Blackbaud  TomTom NV

Poor diversification

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

Pair Corralation between Blackbaud and TomTom NV

Given the investment horizon of 90 days Blackbaud is expected to generate 0.64 times more return on investment than TomTom NV. However, Blackbaud is 1.57 times less risky than TomTom NV. It trades about -0.13 of its potential returns per unit of risk. TomTom NV is currently generating about -0.14 per unit of risk. If you would invest  7,380  in Blackbaud on December 29, 2024 and sell it today you would lose (1,169) from holding Blackbaud or give up 15.84% of portfolio value over 90 days.

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

Blackbaud  vs.  TomTom NV

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.

TomTom NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days TomTom NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Blackbaud and TomTom NV

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

The idea behind Blackbaud and TomTom NV 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 Anywhere module to track or share privately all of your investments from the convenience of any device.