Correlation Between Black Diamond and Avidity Biosciences

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

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

Diversification Opportunities for Black Diamond and Avidity Biosciences

-0.44

Correlation Coefficient

Black Diamond  Avidity Biosciences

Very good diversification

The 3 months correlation between Black and Avidity is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Therapeutics and Avidity Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avidity Biosciences and Black Diamond 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 Black Diamond Therapeutics are associated (or correlated) with Avidity Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avidity Biosciences has no effect on the direction of Black Diamond i.e., Black Diamond and Avidity Biosciences go up and down completely randomly.

Pair Corralation between Black Diamond and Avidity Biosciences

Given the investment horizon of 90 days Black Diamond Therapeutics is expected to generate 2.25 times more return on investment than Avidity Biosciences. However, Black Diamond is 2.25 times more volatile than Avidity Biosciences. It trades about 0.04 of its potential returns per unit of risk. Avidity Biosciences is currently generating about 0.08 per unit of risk. If you would invest  159.00  in Black Diamond Therapeutics on August 30, 2024 and sell it today you would earn a total of  98.00  from holding Black Diamond Therapeutics or generate 61.64% return on investment over 90 days.

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

Black Diamond Therapeutics  vs.  Avidity Biosciences

Black Diamond Therap

Risk-Adjusted Performance

0 of 100

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Avidity Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avidity Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Avidity Biosciences is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Black Diamond and Avidity Biosciences

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

The idea behind Black Diamond Therapeutics and Avidity Biosciences 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.