Correlation Between Black Hills and CF Industries
Can any of the company-specific risk be diversified away by investing in both Black Hills and CF Industries 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 CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and CF Industries Holdings, you can compare the effects of market volatilities on Black Hills and CF Industries 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 CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and CF Industries.
Diversification Opportunities for Black Hills and CF Industries
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Black and CF Industries is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Black Hills i.e., Black Hills and CF Industries go up and down completely randomly.
Pair Corralation between Black Hills and CF Industries
Considering the 90-day investment horizon Black Hills is expected to generate 0.65 times more return on investment than CF Industries. However, Black Hills is 1.55 times less risky than CF Industries. It trades about 0.11 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.06 per unit of risk. If you would invest 5,513 in Black Hills on September 1, 2024 and sell it today you would earn a total of 894.00 from holding Black Hills or generate 16.22% 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. CF Industries Holdings
Performance |
| Timeline |
| Black Hills |
| CF Industries Holdings |
Black Hills and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and CF Industries
The main advantage of trading using opposite Black Hills and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, CF Industries 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 CF Industries will offset losses from the drop in CF Industries' long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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