Correlation Between Barings BDC and Black Hills

Can any of the company-specific risk be diversified away by investing in both Barings BDC 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 Barings BDC and Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barings BDC and Black Hills, you can compare the effects of market volatilities on Barings BDC 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 Barings BDC with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings BDC and Black Hills.

Diversification Opportunities for Barings BDC and Black Hills

0.58

Correlation Coefficient

Barings BDC  Black Hills

Very weak diversification

The 3 months correlation between Barings and Black is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and Black Hills go up and down completely randomly.

Pair Corralation between Barings BDC and Black Hills

Given the investment horizon of 90 days Barings BDC is expected to generate 1.04 times less return on investment than Black Hills. But when comparing it to its historical volatility, Barings BDC is 1.24 times less risky than Black Hills. It trades about 0.07 of its potential returns per unit of risk. Black Hills is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,773  in Black Hills on December 28, 2024 and sell it today you would earn a total of  230.00  from holding Black Hills or generate 3.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Barings BDC  vs.  Black Hills

Barings BDC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Black Hills

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Barings BDC and Black Hills

The main advantage of trading using opposite Barings BDC and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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.

The idea behind Barings BDC and Black Hills pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.