Correlation Between Blackline and Micro Focus

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Can any of the company-specific risk be diversified away by investing in both Blackline and Micro Focus 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 Blackline and Micro Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackline and Micro Focus Intl, you can compare the effects of market volatilities on Blackline and Micro Focus 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 Blackline with a short position of Micro Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackline and Micro Focus.

Diversification Opportunities for Blackline and Micro Focus

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Blackline and Micro is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Blackline and Micro Focus Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Focus Intl and Blackline 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 Blackline are associated (or correlated) with Micro Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Focus Intl has no effect on the direction of Blackline i.e., Blackline and Micro Focus go up and down completely randomly.

Pair Corralation between Blackline and Micro Focus

Allowing for the 90-day total investment horizon Blackline is expected to under-perform the Micro Focus. But the stock apears to be less risky and, when comparing its historical volatility, Blackline is 1.95 times less risky than Micro Focus. The stock trades about -0.02 of its potential returns per unit of risk. The Micro Focus Intl is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  332.00  in Micro Focus Intl on June 28, 2022 and sell it today you would earn a total of  224.00  from holding Micro Focus Intl or generate 67.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Blackline  vs.  Micro Focus Intl

 Performance (%) 
       Timeline  
Blackline 
Blackline Performance
0 of 100
Over the last 90 days Blackline has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's essential indicators remain relatively steady which may send shares a bit higher in October 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Blackline Price Channel

Micro Focus Intl 
Micro Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Micro Focus Intl are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Micro Focus displayed solid returns over the last few months and may actually be approaching a breakup point.

Micro Price Channel

Blackline and Micro Focus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Blackline and Micro Focus

The main advantage of trading using opposite Blackline and Micro Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackline position performs unexpectedly, Micro Focus 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 Micro Focus will offset losses from the drop in Micro Focus' long position.
Blackline vs. Kibush Capital Corp
The idea behind Blackline and Micro Focus Intl 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.
Micro Focus vs. Kibush Capital Corp
Check out your portfolio center. 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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