Correlation Between Black Hills and Universal
Can any of the company-specific risk be diversified away by investing in both Black Hills and Universal 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 Universal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Universal, you can compare the effects of market volatilities on Black Hills and Universal 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 Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Universal.
Diversification Opportunities for Black Hills and Universal
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Black and Universal is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Black Hills i.e., Black Hills and Universal go up and down completely randomly.
Pair Corralation between Black Hills and Universal
Considering the 90-day investment horizon Black Hills is expected to generate 1.83 times less return on investment than Universal. But when comparing it to its historical volatility, Black Hills is 1.01 times less risky than Universal. It trades about 0.27 of its potential returns per unit of risk. Universal is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 5,005 in Universal on August 28, 2024 and sell it today you would earn a total of 794.00 from holding Universal or generate 15.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Universal
Performance |
| Timeline |
| Black Hills |
| Universal |
Black Hills and Universal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Universal
The main advantage of trading using opposite Black Hills and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, Universal 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 Universal will offset losses from the drop in Universal's long position.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Universal vs. Imperial Brands PLC | Universal vs. Philip Morris International | Universal vs. Turning Point Brands | Universal vs. Japan Tobacco ADR |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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