Correlation Between Black Hills and Timken
Can any of the company-specific risk be diversified away by investing in both Black Hills and Timken 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 Timken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Timken Company, you can compare the effects of market volatilities on Black Hills and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Timken.
Diversification Opportunities for Black Hills and Timken
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Black and Timken is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Black Hills i.e., Black Hills and Timken go up and down completely randomly.
Pair Corralation between Black Hills and Timken
Considering the 90-day investment horizon Black Hills is expected to generate 0.39 times more return on investment than Timken. However, Black Hills is 2.58 times less risky than Timken. It trades about 0.3 of its potential returns per unit of risk. Timken Company is currently generating about -0.06 per unit of risk. If you would invest 5,858 in Black Hills on September 1, 2024 and sell it today you would earn a total of 549.00 from holding Black Hills or generate 9.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Timken Company
Performance |
| Timeline |
| Black Hills |
| Timken Company |
Black Hills and Timken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Timken
The main advantage of trading using opposite Black Hills and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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