Correlation Between Black Hills and HE Equipment
Can any of the company-specific risk be diversified away by investing in both Black Hills and HE Equipment 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 HE Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and HE Equipment Services, you can compare the effects of market volatilities on Black Hills and HE Equipment 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 HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and HE Equipment.
Diversification Opportunities for Black Hills and HE Equipment
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Black and HEES is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Black Hills i.e., Black Hills and HE Equipment go up and down completely randomly.
Pair Corralation between Black Hills and HE Equipment
Considering the 90-day investment horizon Black Hills is expected to generate 10.65 times less return on investment than HE Equipment. But when comparing it to its historical volatility, Black Hills is 4.05 times less risky than HE Equipment. It trades about 0.01 of its potential returns per unit of risk. HE Equipment Services is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,328 in HE Equipment Services on November 19, 2024 and sell it today you would earn a total of 3,428 from holding HE Equipment Services or generate 64.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. HE Equipment Services
Performance |
| Timeline |
| Black Hills |
| HE Equipment Services |
Black Hills and HE Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and HE Equipment
The main advantage of trading using opposite Black Hills and HE Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, HE Equipment 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 HE Equipment will offset losses from the drop in HE Equipment's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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