Correlation Between Bank of America and Black Hills
Can any of the company-specific risk be diversified away by investing in both Bank of America and Black Hills 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 Bank of America and Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Black Hills, you can compare the effects of market volatilities on Bank of America and Black Hills 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 Bank of America with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Black Hills.
Diversification Opportunities for Bank of America and Black Hills
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Black is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Bank of America 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 Bank of America are associated (or correlated) with Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Bank of America i.e., Bank of America and Black Hills go up and down completely randomly.
Pair Corralation between Bank of America and Black Hills
Assuming the 90 days trading horizon Bank of America is expected to generate 1.53 times less return on investment than Black Hills. But when comparing it to its historical volatility, Bank of America is 2.09 times less risky than Black Hills. It trades about 0.1 of its potential returns per unit of risk. Black Hills is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,107 in Black Hills on August 29, 2024 and sell it today you would earn a total of 1,252 from holding Black Hills or generate 24.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Black Hills
Performance |
| Timeline |
| Bank of America |
| Black Hills |
Bank of America and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Black Hills
The main advantage of trading using opposite Bank of America and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Black Hills 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 Black Hills will offset losses from the drop in Black Hills' long position.| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank |
| 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 Stocks Directory module to find actively traded stocks across global markets.
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