Correlation Between High Yield and Black Diamond

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

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

Diversification Opportunities for High Yield and Black Diamond

0.21

Correlation Coefficient

High Yield  Black Diamond

Modest diversification

The 3 months correlation between High and Black is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Black Diamond Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Group and High Yield 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 High Yield Municipal Fund 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 Group has no effect on the direction of High Yield i.e., High Yield and Black Diamond go up and down completely randomly.

Pair Corralation between High Yield and Black Diamond

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.19 times more return on investment than Black Diamond. However, High Yield Municipal Fund is 5.21 times less risky than Black Diamond. It trades about 0.05 of its potential returns per unit of risk. Black Diamond Group is currently generating about -0.07 per unit of risk. If you would invest  897.00  in High Yield Municipal Fund on September 12, 2024 and sell it today you would earn a total of  8.00  from holding High Yield Municipal Fund or generate 0.89% return on investment over 90 days.

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

High Yield Municipal Fund  vs.  Black Diamond Group

High Yield Municipal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Black Diamond Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Diamond Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with High Yield and Black Diamond

The main advantage of trading using opposite High Yield and Black Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield 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 High Yield Municipal Fund and Black Diamond Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.