Correlation Between Black Hills and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both Black Hills and Chesapeake Utilities 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 Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Chesapeake Utilities, you can compare the effects of market volatilities on Black Hills and Chesapeake Utilities 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 Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Chesapeake Utilities.
Diversification Opportunities for Black Hills and Chesapeake Utilities
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Black and Chesapeake is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of Black Hills i.e., Black Hills and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between Black Hills and Chesapeake Utilities
Considering the 90-day investment horizon Black Hills is expected to generate 1.13 times more return on investment than Chesapeake Utilities. However, Black Hills is 1.13 times more volatile than Chesapeake Utilities. It trades about 0.2 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.18 per unit of risk. If you would invest 5,621 in Black Hills on November 9, 2024 and sell it today you would earn a total of 369.00 from holding Black Hills or generate 6.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Chesapeake Utilities
Performance |
| Timeline |
| Black Hills |
| Chesapeake Utilities |
Black Hills and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Chesapeake Utilities
The main advantage of trading using opposite Black Hills and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Chesapeake Utilities 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 Chesapeake Utilities will offset losses from the drop in Chesapeake Utilities' long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Chesapeake Utilities vs. Northwest Natural Gas | Chesapeake Utilities vs. One Gas | Chesapeake Utilities vs. NewJersey Resources | Chesapeake Utilities vs. Spire Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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