Correlation Between Black Hills and Utilities Fund

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

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

Diversification Opportunities for Black Hills and Utilities Fund

0.66

Correlation Coefficient

Black Hills  Utilities Fund

Poor diversification

The 3 months correlation between Black and Utilities is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Utilities Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Class and Black Hills 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 Hills are associated (or correlated) with Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Class has no effect on the direction of Black Hills i.e., Black Hills and Utilities Fund go up and down completely randomly.

Pair Corralation between Black Hills and Utilities Fund

Considering the 90-day investment horizon Black Hills is expected to generate 1.16 times more return on investment than Utilities Fund. However, Black Hills is 1.16 times more volatile than Utilities Fund Class. It trades about 0.02 of its potential returns per unit of risk. Utilities Fund Class is currently generating about -0.02 per unit of risk. If you would invest  6,052  in Black Hills on September 17, 2024 and sell it today you would earn a total of  44.00  from holding Black Hills or generate 0.73% return on investment over 90 days.

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

Black Hills  vs.  Utilities Fund Class

Black Hills

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Utilities Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utilities Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Utilities Fund is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Black Hills and Utilities Fund

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

The idea behind Black Hills and Utilities Fund Class 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.