Correlation Between Diamond Fields and Ballard Power

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

By analyzing existing cross correlation between Diamond Fields Resources and Ballard Power Systems, you can compare the effects of market volatilities on Diamond Fields and Ballard Power 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 Diamond Fields with a short position of Ballard Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Fields and Ballard Power.

Diversification Opportunities for Diamond Fields and Ballard Power

-0.43

Correlation Coefficient

Diamond Fields  Ballard Power

Very good diversification

The 3 months correlation between Diamond and Ballard is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Fields Resources and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems and Diamond Fields 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 Diamond Fields Resources are associated (or correlated) with Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Diamond Fields i.e., Diamond Fields and Ballard Power go up and down completely randomly.

Pair Corralation between Diamond Fields and Ballard Power

Assuming the 90 days horizon Diamond Fields Resources is expected to generate 1.81 times more return on investment than Ballard Power. However, Diamond Fields is 1.81 times more volatile than Ballard Power Systems. It trades about 0.04 of its potential returns per unit of risk. Ballard Power Systems is currently generating about 0.01 per unit of risk. If you would invest  3.00  in Diamond Fields Resources on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Diamond Fields 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

Diamond Fields Resources  vs.  Ballard Power Systems

Diamond Fields Resources

Risk-Adjusted Performance

3 of 100

Insignificant

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

Ballard Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ballard Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ballard Power is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Diamond Fields and Ballard Power

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

The idea behind Diamond Fields Resources and Ballard Power Systems 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.