Correlation Between Western Asset and Black Hills
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Investment and Black Hills, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Black Hills.
Diversification Opportunities for Western Asset and Black Hills
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Black is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Western Asset 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 Western Asset Investment 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 Western Asset i.e., Western Asset and Black Hills go up and down completely randomly.
Pair Corralation between Western Asset and Black Hills
Considering the 90-day investment horizon Western Asset is expected to generate 13.92 times less return on investment than Black Hills. But when comparing it to its historical volatility, Western Asset Investment is 2.28 times less risky than Black Hills. It trades about 0.02 of its potential returns per unit of risk. Black Hills is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,513 in Black Hills on August 30, 2024 and sell it today you would earn a total of 881.00 from holding Black Hills or generate 15.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Investment vs. Black Hills
Performance |
| Timeline |
| Western Asset Investment |
| Black Hills |
Western Asset and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Black Hills
The main advantage of trading using opposite Western Asset and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. ClimateRock Class A | Western Asset vs. CF Acquisition VII | Western Asset vs. DP Cap Acquisition |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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