Correlation Between Black Hills and Allete
Can any of the company-specific risk be diversified away by investing in both Black Hills and Allete 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 Allete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Allete Inc, you can compare the effects of market volatilities on Black Hills and Allete 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 Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Allete.
Diversification Opportunities for Black Hills and Allete
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Allete is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Black Hills i.e., Black Hills and Allete go up and down completely randomly.
Pair Corralation between Black Hills and Allete
Considering the 90-day investment horizon Black Hills is expected to generate 3.27 times more return on investment than Allete. However, Black Hills is 3.27 times more volatile than Allete Inc. It trades about 0.27 of its potential returns per unit of risk. Allete Inc is currently generating about 0.24 per unit of risk. If you would invest 5,972 in Black Hills on August 27, 2024 and sell it today you would earn a total of 494.00 from holding Black Hills or generate 8.27% 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. Allete Inc
Performance |
| Timeline |
| Black Hills |
| Allete Inc |
Black Hills and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Allete
The main advantage of trading using opposite Black Hills and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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