Correlation Between Black Hills and Bowhead Specialty
Can any of the company-specific risk be diversified away by investing in both Black Hills and Bowhead Specialty 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 Bowhead Specialty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Bowhead Specialty Holdings, you can compare the effects of market volatilities on Black Hills and Bowhead Specialty 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 Bowhead Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Bowhead Specialty.
Diversification Opportunities for Black Hills and Bowhead Specialty
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Bowhead is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty 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 Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Black Hills i.e., Black Hills and Bowhead Specialty go up and down completely randomly.
Pair Corralation between Black Hills and Bowhead Specialty
Considering the 90-day investment horizon Black Hills is expected to generate 52.0 times less return on investment than Bowhead Specialty. But when comparing it to its historical volatility, Black Hills is 1.65 times less risky than Bowhead Specialty. It trades about 0.0 of its potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,380 in Bowhead Specialty Holdings on August 31, 2024 and sell it today you would earn a total of 1,236 from holding Bowhead Specialty Holdings or generate 51.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 26.67% |
| Values | Daily Returns |
Black Hills vs. Bowhead Specialty Holdings
Performance |
| Timeline |
| Black Hills |
| Bowhead Specialty |
Black Hills and Bowhead Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Bowhead Specialty
The main advantage of trading using opposite Black Hills and Bowhead Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Bowhead Specialty 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 Bowhead Specialty will offset losses from the drop in Bowhead Specialty's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Bowhead Specialty vs. Axalta Coating Systems | Bowhead Specialty vs. Hawkins | Bowhead Specialty vs. Century Aluminum | Bowhead Specialty vs. CECO Environmental Corp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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