Correlation Between L1 Long and Black Rock

Can any of the company-specific risk be diversified away by investing in both L1 Long and Black Rock 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 L1 Long and Black Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between L1 Long Short and Black Rock Mining, you can compare the effects of market volatilities on L1 Long and Black Rock 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 L1 Long with a short position of Black Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of L1 Long and Black Rock.

Diversification Opportunities for L1 Long and Black Rock

0.71

Correlation Coefficient

L1 Long  Black Rock

Poor diversification

The 3 months correlation between LSF and Black is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding L1 Long Short and Black Rock Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Rock Mining and L1 Long 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 L1 Long Short are associated (or correlated) with Black Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Rock Mining has no effect on the direction of L1 Long i.e., L1 Long and Black Rock go up and down completely randomly.

Pair Corralation between L1 Long and Black Rock

Assuming the 90 days trading horizon L1 Long Short is expected to under-perform the Black Rock. But the stock apears to be less risky and, when comparing its historical volatility, L1 Long Short is 4.07 times less risky than Black Rock. The stock trades about -0.26 of its potential returns per unit of risk. The Black Rock Mining is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Black Rock Mining on October 8, 2024 and sell it today you would lose (0.20) from holding Black Rock Mining or give up 5.71% of portfolio value over 90 days.

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

L1 Long Short  vs.  Black Rock Mining

L1 Long Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L1 Long Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, L1 Long is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Black Rock Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Rock Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with L1 Long and Black Rock

The main advantage of trading using opposite L1 Long and Black Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L1 Long position performs unexpectedly, Black Rock 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 Rock will offset losses from the drop in Black Rock's long position.

The idea behind L1 Long Short and Black Rock Mining 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.