Correlation Between Energy Of and Black Hills

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

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

Diversification Opportunities for Energy Of and Black Hills

0.09

Correlation Coefficient

Energy Of  Black Hills

Significant diversification

The 3 months correlation between Energy and Black is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Energy of Minas and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Energy Of 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 Energy of Minas are associated (or correlated) with Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Energy Of i.e., Energy Of and Black Hills go up and down completely randomly.

Pair Corralation between Energy Of and Black Hills

Assuming the 90 days horizon Energy Of is expected to generate 15.91 times less return on investment than Black Hills. In addition to that, Energy Of is 1.9 times more volatile than Black Hills. It trades about 0.0 of its total potential returns per unit of risk. Black Hills is currently generating about 0.13 per unit of volatility. If you would invest  5,851  in Black Hills on August 30, 2024 and sell it today you would earn a total of  543.00  from holding Black Hills or generate 9.28% return on investment over 90 days.

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

Energy of Minas  vs.  Black Hills

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy Of is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Black Hills

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward-looking signals, Black Hills may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Energy Of and Black Hills

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

The idea behind Energy of Minas and Black Hills 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.