Correlation Between Black Hills and FTAI Aviation

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

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

Diversification Opportunities for Black Hills and FTAI Aviation

0.54

Correlation Coefficient

Black Hills  FTAI Aviation

Very weak diversification

The 3 months correlation between Black and FTAI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Black Hills i.e., Black Hills and FTAI Aviation go up and down completely randomly.

Pair Corralation between Black Hills and FTAI Aviation

Considering the 90-day investment horizon Black Hills is expected to generate 1.48 times more return on investment than FTAI Aviation. However, Black Hills is 1.48 times more volatile than FTAI Aviation Ltd. It trades about 0.08 of its potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.07 per unit of risk. If you would invest  5,294  in Black Hills on September 29, 2024 and sell it today you would earn a total of  561.00  from holding Black Hills or generate 10.6% return on investment over 90 days.

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

Black Hills  vs.  FTAI Aviation Ltd

Black Hills

Risk-Adjusted Performance

0 of 100

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.

FTAI Aviation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Black Hills and FTAI Aviation

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

The idea behind Black Hills and FTAI Aviation Ltd 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.