Correlation Between PacifiCorp and Black Hills

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

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

Diversification Opportunities for PacifiCorp and Black Hills

-0.04

Correlation Coefficient

PacifiCorp  Black Hills

Good diversification

The 3 months correlation between PacifiCorp and Black is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PacifiCorp and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and PacifiCorp 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 PacifiCorp 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 PacifiCorp i.e., PacifiCorp and Black Hills go up and down completely randomly.

Pair Corralation between PacifiCorp and Black Hills

Assuming the 90 days horizon PacifiCorp is expected to generate 3.61 times more return on investment than Black Hills. However, PacifiCorp is 3.61 times more volatile than Black Hills. It trades about 0.03 of its potential returns per unit of risk. Black Hills is currently generating about 0.02 per unit of risk. If you would invest  12,327  in PacifiCorp on September 15, 2024 and sell it today you would earn a total of  277.00  from holding PacifiCorp or generate 2.25% return on investment over 90 days.

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

PacifiCorp  vs.  Black Hills

PacifiCorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PacifiCorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, PacifiCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with PacifiCorp and Black Hills

The main advantage of trading using opposite PacifiCorp and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PacifiCorp 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 PacifiCorp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.