Correlation Between Black Hills and Alliant Energy
Can any of the company-specific risk be diversified away by investing in both Black Hills and Alliant Energy 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 Alliant Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Alliant Energy Corp, you can compare the effects of market volatilities on Black Hills and Alliant Energy 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 Alliant Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Alliant Energy.
Diversification Opportunities for Black Hills and Alliant Energy
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Black and Alliant is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp 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 Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Black Hills i.e., Black Hills and Alliant Energy go up and down completely randomly.
Pair Corralation between Black Hills and Alliant Energy
Considering the 90-day investment horizon Black Hills is expected to generate 0.88 times more return on investment than Alliant Energy. However, Black Hills is 1.14 times less risky than Alliant Energy. It trades about 0.24 of its potential returns per unit of risk. Alliant Energy Corp is currently generating about 0.2 per unit of risk. If you would invest 5,933 in Black Hills on August 30, 2024 and sell it today you would earn a total of 461.00 from holding Black Hills or generate 7.77% 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. Alliant Energy Corp
Performance |
| Timeline |
| Black Hills |
| Alliant Energy Corp |
Black Hills and Alliant Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Alliant Energy
The main advantage of trading using opposite Black Hills and Alliant Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Alliant Energy 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 Alliant Energy will offset losses from the drop in Alliant Energy's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Alliant Energy vs. DTE Energy | Alliant Energy vs. Ameren Corp | Alliant Energy vs. CenterPoint Energy | Alliant Energy vs. Pinnacle West Capital |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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