Correlation Between Arcus Biosciences and Black Diamond

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

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

Diversification Opportunities for Arcus Biosciences and Black Diamond

0.08

Correlation Coefficient

Arcus Biosciences  Black Diamond

Significant diversification

The 3 months correlation between Arcus and Black is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences 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 Arcus Biosciences 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 Arcus Biosciences 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 Arcus Biosciences i.e., Arcus Biosciences and Black Diamond go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Black Diamond

Given the investment horizon of 90 days Arcus Biosciences is expected to generate 0.92 times more return on investment than Black Diamond. However, Arcus Biosciences is 1.08 times less risky than Black Diamond. It trades about 0.02 of its potential returns per unit of risk. Black Diamond Therapeutics is currently generating about -0.27 per unit of risk. If you would invest  1,560  in Arcus Biosciences on September 24, 2024 and sell it today you would lose (10.00) from holding Arcus Biosciences or give up 0.64% of portfolio value over 90 days.

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

Arcus Biosciences  vs.  Black Diamond Therapeutics

Arcus Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arcus Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arcus Biosciences is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Arcus Biosciences and Black Diamond

The main advantage of trading using opposite Arcus Biosciences and Black Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcus Biosciences 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 Arcus Biosciences 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.