Correlation Between Equifax and Blue Diamond

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

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

Diversification Opportunities for Equifax and Blue Diamond

0.23

Correlation Coefficient

Equifax  Blue Diamond

Modest diversification

The 3 months correlation between Equifax and Blue is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Blue Diamond Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Diamond Ventures and Equifax 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 Equifax are associated (or correlated) with Blue Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Diamond Ventures has no effect on the direction of Equifax i.e., Equifax and Blue Diamond go up and down completely randomly.

Pair Corralation between Equifax and Blue Diamond

Considering the 90-day investment horizon Equifax is expected to under-perform the Blue Diamond. But the stock apears to be less risky and, when comparing its historical volatility, Equifax is 21.54 times less risky than Blue Diamond. The stock trades about -0.03 of its potential returns per unit of risk. The Blue Diamond Ventures is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Blue Diamond Ventures on December 27, 2024 and sell it today you would earn a total of  0.00  from holding Blue Diamond Ventures or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Equifax  vs.  Blue Diamond Ventures

Equifax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Equifax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Blue Diamond Ventures

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Diamond Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Blue Diamond showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equifax and Blue Diamond

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

The idea behind Equifax and Blue Diamond Ventures 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.