Correlation Between HCW Biologics and Black Diamond

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

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

Diversification Opportunities for HCW Biologics and Black Diamond

0.36

Correlation Coefficient

HCW Biologics  Black Diamond

Weak diversification

The 3 months correlation between HCW and Black is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Black Diamond Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Therap and HCW Biologics 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 HCW Biologics are associated (or correlated) with Black Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Diamond Therap has no effect on the direction of HCW Biologics i.e., HCW Biologics and Black Diamond go up and down completely randomly.

Pair Corralation between HCW Biologics and Black Diamond

Given the investment horizon of 90 days HCW Biologics is expected to generate 3.26 times more return on investment than Black Diamond. However, HCW Biologics is 3.26 times more volatile than Black Diamond Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Black Diamond Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  42.00  in HCW Biologics on December 27, 2024 and sell it today you would lose (11.83) from holding HCW Biologics or give up 28.17% of portfolio value over 90 days.

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

HCW Biologics  vs.  Black Diamond Therapeutics

HCW Biologics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Black Diamond Therap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Diamond Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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.

Pair Trading with HCW Biologics and Black Diamond

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

The idea behind HCW Biologics and Black Diamond Therapeutics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.