Correlation Between Black Widow and CBLT

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

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

Diversification Opportunities for Black Widow and CBLT

-0.56

Correlation Coefficient

Black Widow  CBLT

Excellent diversification

The 3 months correlation between Black and CBLT is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Black Widow Resources and CBLT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBLT Inc and Black Widow 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 Black Widow Resources are associated (or correlated) with CBLT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBLT Inc has no effect on the direction of Black Widow i.e., Black Widow and CBLT go up and down completely randomly.

Pair Corralation between Black Widow and CBLT

Assuming the 90 days horizon Black Widow Resources is expected to generate 1.61 times more return on investment than CBLT. However, Black Widow is 1.61 times more volatile than CBLT Inc. It trades about 0.04 of its potential returns per unit of risk. CBLT Inc is currently generating about 0.03 per unit of risk. If you would invest  1.00  in Black Widow Resources on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Black Widow Resources or generate 0.0% return on investment over 90 days.

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

Black Widow Resources  vs.  CBLT Inc

Black Widow Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Widow Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Black Widow showed solid returns over the last few months and may actually be approaching a breakup point.

CBLT Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CBLT Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, CBLT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Black Widow and CBLT

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

The idea behind Black Widow Resources and CBLT Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..