Can any of the company-specific risk be diversified away by investing in both Blackbaud and Manhattan Associates 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 Blackbaud and Manhattan Associates into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackbaud and Manhattan Associates, you can compare the effects of market volatilities on Blackbaud and Manhattan Associates 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 Blackbaud with a short position of Manhattan Associates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackbaud and Manhattan Associates.
Diversification Opportunities for Blackbaud and Manhattan Associates
The 3 months correlation between Blackbaud and Manhattan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Blackbaud and Manhattan Associates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manhattan Associates and Blackbaud 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 Blackbaud are associated (or correlated) with Manhattan Associates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manhattan Associates has no effect on the direction of Blackbaud i.e., Blackbaud and Manhattan Associates go up and down completely randomly.
Pair Corralation between Blackbaud and Manhattan Associates
Given the investment horizon of 90 days Blackbaud is expected to generate 0.71 times more return on investment than Manhattan Associates. However, Blackbaud is 1.4 times less risky than Manhattan Associates. It trades about 0.15 of its potential returns per unit of risk. Manhattan Associates is currently generating about -0.13 per unit of risk. If you would invest 7,201 in Blackbaud on March 6, 2024 and sell it today you would earn a total of 693.00 from holding Blackbaud or generate 9.62% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Blackbaud are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal forward-looking signals, Blackbaud may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Over the last 90 days Manhattan Associates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.