Correlation Between Black Sea and Multiconsult

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

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

Diversification Opportunities for Black Sea and Multiconsult

-0.53

Correlation Coefficient

Black Sea  Multiconsult

Excellent diversification

The 3 months correlation between Black and Multiconsult is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Black Sea Property and Multiconsult AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiconsult AS and Black Sea 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 Sea Property are associated (or correlated) with Multiconsult. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiconsult AS has no effect on the direction of Black Sea i.e., Black Sea and Multiconsult go up and down completely randomly.

Pair Corralation between Black Sea and Multiconsult

Assuming the 90 days trading horizon Black Sea Property is expected to generate 57.48 times more return on investment than Multiconsult. However, Black Sea is 57.48 times more volatile than Multiconsult AS. It trades about 0.09 of its potential returns per unit of risk. Multiconsult AS is currently generating about 0.11 per unit of risk. If you would invest  21.00  in Black Sea Property on September 25, 2024 and sell it today you would lose (10.00) from holding Black Sea Property or give up 47.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Black Sea Property  vs.  Multiconsult AS

Black Sea Property

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Sea Property are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Black Sea disclosed solid returns over the last few months and may actually be approaching a breakup point.

Multiconsult AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multiconsult AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Multiconsult may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Black Sea and Multiconsult

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

The idea behind Black Sea Property and Multiconsult AS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.