Correlation Between New Providence and Black Hawk
Can any of the company-specific risk be diversified away by investing in both New Providence and Black Hawk 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 New Providence and Black Hawk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Providence Acquisition and Black Hawk Acquisition, you can compare the effects of market volatilities on New Providence and Black Hawk 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 New Providence with a short position of Black Hawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Providence and Black Hawk.
Diversification Opportunities for New Providence and Black Hawk
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Black is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding New Providence Acquisition and Black Hawk Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hawk Acquisition and New Providence 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 New Providence Acquisition are associated (or correlated) with Black Hawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hawk Acquisition has no effect on the direction of New Providence i.e., New Providence and Black Hawk go up and down completely randomly.
Pair Corralation between New Providence and Black Hawk
Assuming the 90 days horizon New Providence Acquisition is expected to generate 1.26 times more return on investment than Black Hawk. However, New Providence is 1.26 times more volatile than Black Hawk Acquisition. It trades about 0.03 of its potential returns per unit of risk. Black Hawk Acquisition is currently generating about 0.02 per unit of risk. If you would invest 1,199 in New Providence Acquisition on September 2, 2024 and sell it today you would earn a total of 21.00 from holding New Providence Acquisition or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.69% |
| Values | Daily Returns |
New Providence Acquisition vs. Black Hawk Acquisition
Performance |
| Timeline |
| New Providence Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Black Hawk Acquisition |
New Providence and Black Hawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Providence and Black Hawk
The main advantage of trading using opposite New Providence and Black Hawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Providence position performs unexpectedly, Black Hawk 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 Hawk will offset losses from the drop in Black Hawk's long position.| New Providence vs. Consol Energy | New Providence vs. Jeld Wen Holding | New Providence vs. NiSource | New Providence vs. Cheniere Energy Partners |
| Black Hawk vs. Voyager Acquisition Corp | Black Hawk vs. CO2 Energy Transition | Black Hawk vs. Vine Hill Capital | Black Hawk vs. DUET Acquisition Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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