Correlation Between Black Hills and BTB Real

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

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

Diversification Opportunities for Black Hills and BTB Real

0.73

Correlation Coefficient

Black Hills  BTB Real

Poor diversification

The 3 months correlation between Black and BTB is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and BTB Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTB Real Estate and Black Hills 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 Black Hills are associated (or correlated) with BTB Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTB Real Estate has no effect on the direction of Black Hills i.e., Black Hills and BTB Real go up and down completely randomly.

Pair Corralation between Black Hills and BTB Real

Considering the 90-day investment horizon Black Hills is expected to generate 1.07 times more return on investment than BTB Real. However, Black Hills is 1.07 times more volatile than BTB Real Estate. It trades about 0.18 of its potential returns per unit of risk. BTB Real Estate is currently generating about 0.15 per unit of risk. If you would invest  5,802  in Black Hills on November 29, 2024 and sell it today you would earn a total of  164.00  from holding Black Hills or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Black Hills  vs.  BTB Real Estate

Black Hills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Hills has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

BTB Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days BTB Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Black Hills and BTB Real

The main advantage of trading using opposite Black Hills and BTB Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills position performs unexpectedly, BTB Real 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 BTB Real will offset losses from the drop in BTB Real's long position.

The idea behind Black Hills and BTB Real Estate 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.