Correlation Between Custom Truck and Black Hills
Can any of the company-specific risk be diversified away by investing in both Custom Truck 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 Custom Truck and Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Custom Truck One and Black Hills, you can compare the effects of market volatilities on Custom Truck 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 Custom Truck with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Custom Truck and Black Hills.
Diversification Opportunities for Custom Truck and Black Hills
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Custom and Black is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Custom Truck 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 Custom Truck One 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 Custom Truck i.e., Custom Truck and Black Hills go up and down completely randomly.
Pair Corralation between Custom Truck and Black Hills
Given the investment horizon of 90 days Custom Truck One is expected to under-perform the Black Hills. In addition to that, Custom Truck is 2.3 times more volatile than Black Hills. It trades about -0.01 of its total potential returns per unit of risk. Black Hills is currently generating about 0.01 per unit of volatility. If you would invest 5,675 in Black Hills on November 19, 2024 and sell it today you would earn a total of 290.00 from holding Black Hills or generate 5.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Custom Truck One vs. Black Hills
Performance |
| Timeline |
| Custom Truck One |
| Black Hills |
Custom Truck and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Custom Truck and Black Hills
The main advantage of trading using opposite Custom Truck and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Custom Truck 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.| Custom Truck vs. PROG Holdings | Custom Truck vs. McGrath RentCorp | Custom Truck vs. HE Equipment Services | Custom Truck vs. GATX Corporation |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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