Correlation Between Black Hills and Enel SpA

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

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

Diversification Opportunities for Black Hills and Enel SpA

-0.62

Correlation Coefficient

Black Hills  Enel SpA

Excellent diversification

The 3 months correlation between Black and Enel is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA 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 Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of Black Hills i.e., Black Hills and Enel SpA go up and down completely randomly.

Pair Corralation between Black Hills and Enel SpA

Considering the 90-day investment horizon Black Hills is expected to under-perform the Enel SpA. But the stock apears to be less risky and, when comparing its historical volatility, Black Hills is 1.96 times less risky than Enel SpA. The stock trades about -0.12 of its potential returns per unit of risk. The Enel SpA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  687.00  in Enel SpA on September 14, 2024 and sell it today you would earn a total of  24.00  from holding Enel SpA or generate 3.49% return on investment over 90 days.

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

Black Hills  vs.  Enel SpA

Black Hills

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 1 (%) 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.

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental 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 Enel SpA

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

The idea behind Black Hills and Enel SpA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.