Correlation Between Black Hills and Bank of America
Can any of the company-specific risk be diversified away by investing in both Black Hills and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Bank of America, you can compare the effects of market volatilities on Black Hills and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Bank of America.
Diversification Opportunities for Black Hills and Bank of America
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Black and Bank is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Black Hills i.e., Black Hills and Bank of America go up and down completely randomly.
Pair Corralation between Black Hills and Bank of America
Considering the 90-day investment horizon Black Hills is expected to generate 2.09 times more return on investment than Bank of America. However, Black Hills is 2.09 times more volatile than Bank of America. It trades about 0.08 of its potential returns per unit of risk. Bank of America is currently generating about 0.1 per unit of risk. If you would invest 5,107 in Black Hills on August 29, 2024 and sell it today you would earn a total of 1,252 from holding Black Hills or generate 24.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Bank of America
Performance |
| Timeline |
| Black Hills |
| Bank of America |
Black Hills and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Bank of America
The main advantage of trading using opposite Black Hills and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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