Correlation Between Northwest Natural and Black Hills
Can any of the company-specific risk be diversified away by investing in both Northwest Natural 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 Northwest Natural and Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northwest Natural Gas and Black Hills, you can compare the effects of market volatilities on Northwest Natural 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 Northwest Natural with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Natural and Black Hills.
Diversification Opportunities for Northwest Natural and Black Hills
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northwest and Black is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Natural Gas and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Northwest Natural 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 Northwest Natural Gas 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 Northwest Natural i.e., Northwest Natural and Black Hills go up and down completely randomly.
Pair Corralation between Northwest Natural and Black Hills
Considering the 90-day investment horizon Northwest Natural Gas is expected to generate 1.03 times more return on investment than Black Hills. However, Northwest Natural is 1.03 times more volatile than Black Hills. It trades about 0.0 of its potential returns per unit of risk. Black Hills is currently generating about -0.01 per unit of risk. If you would invest 4,163 in Northwest Natural Gas on September 13, 2024 and sell it today you would lose (6.00) from holding Northwest Natural Gas or give up 0.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Natural Gas vs. Black Hills
Performance |
| Timeline |
| Northwest Natural Gas |
| Black Hills |
Northwest Natural and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Natural and Black Hills
The main advantage of trading using opposite Northwest Natural and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Natural 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.| Northwest Natural vs. Chesapeake Utilities | Northwest Natural vs. One Gas | Northwest Natural vs. NiSource | Northwest Natural vs. NewJersey Resources |
| Black Hills vs. NewJersey Resources | Black Hills vs. Northwest Natural Gas | Black Hills vs. Spire Inc | Black Hills vs. Chesapeake Utilities |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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