Correlation Between Black Hills and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both Black Hills and Franklin 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 Franklin 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 Franklin Utilities, you can compare the effects of market volatilities on Black Hills and Franklin 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 Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Franklin Utilities.
Diversification Opportunities for Black Hills and Franklin Utilities
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Black and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Franklin Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin 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 Franklin Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of Black Hills i.e., Black Hills and Franklin Utilities go up and down completely randomly.
Pair Corralation between Black Hills and Franklin Utilities
Considering the 90-day investment horizon Black Hills is expected to generate 6.0 times less return on investment than Franklin Utilities. In addition to that, Black Hills is 1.35 times more volatile than Franklin Utilities. It trades about 0.01 of its total potential returns per unit of risk. Franklin Utilities is currently generating about 0.04 per unit of volatility. If you would invest 2,152 in Franklin Utilities on September 3, 2024 and sell it today you would earn a total of 445.00 from holding Franklin Utilities or generate 20.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Franklin Utilities
Performance |
| Timeline |
| Black Hills |
| Franklin Utilities |
Black Hills and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Franklin Utilities
The main advantage of trading using opposite Black Hills and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Franklin 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 Franklin Utilities will offset losses from the drop in Franklin Utilities' long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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