Correlation Between Black Hills and Kinsale Capital

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

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

Diversification Opportunities for Black Hills and Kinsale Capital

0.69

Correlation Coefficient

Black Hills  Kinsale Capital

Poor diversification

The 3 months correlation between Black and Kinsale is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group 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 Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of Black Hills i.e., Black Hills and Kinsale Capital go up and down completely randomly.

Pair Corralation between Black Hills and Kinsale Capital

Considering the 90-day investment horizon Black Hills is expected to under-perform the Kinsale Capital. But the stock apears to be less risky and, when comparing its historical volatility, Black Hills is 1.93 times less risky than Kinsale Capital. The stock trades about -0.31 of its potential returns per unit of risk. The Kinsale Capital Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  46,931  in Kinsale Capital Group on September 20, 2024 and sell it today you would lose (183.00) from holding Kinsale Capital Group or give up 0.39% of portfolio value over 90 days.

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

Black Hills  vs.  Kinsale Capital Group

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.

Kinsale Capital Group

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinsale Capital Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kinsale Capital is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Black Hills and Kinsale Capital

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

The idea behind Black Hills and Kinsale Capital Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.