Correlation Between Black Diamond and Generation Bio

Can any of the company-specific risk be diversified away by investing in both Black Diamond and Generation Bio 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 Generation Bio 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 Generation Bio Co, you can compare the effects of market volatilities on Black Diamond and Generation Bio 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 Generation Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Diamond and Generation Bio.

Diversification Opportunities for Black Diamond and Generation Bio

0.53

Correlation Coefficient

Black Diamond  Generation Bio

Very weak diversification

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

Pair Corralation between Black Diamond and Generation Bio

Given the investment horizon of 90 days Black Diamond Therapeutics is expected to under-perform the Generation Bio. But the stock apears to be less risky and, when comparing its historical volatility, Black Diamond Therapeutics is 1.23 times less risky than Generation Bio. The stock trades about -0.14 of its potential returns per unit of risk. The Generation Bio Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  293.00  in Generation Bio Co on July 21, 2024 and sell it today you would lose (67.00) from holding Generation Bio Co or give up 22.87% of portfolio value over 90 days.

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

Black Diamond Therapeutics  vs.  Generation Bio Co

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

Generation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Bio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Black Diamond and Generation Bio

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

The idea behind Black Diamond Therapeutics and Generation Bio Co 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.