Correlation Between Black Hills and Pekin Life

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

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

Diversification Opportunities for Black Hills and Pekin Life

0.5

Correlation Coefficient

Black Hills  Pekin Life

Very weak diversification

The 3 months correlation between Black and Pekin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Pekin Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pekin Life Insurance 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 Pekin Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pekin Life Insurance has no effect on the direction of Black Hills i.e., Black Hills and Pekin Life go up and down completely randomly.

Pair Corralation between Black Hills and Pekin Life

Considering the 90-day investment horizon Black Hills is expected to under-perform the Pekin Life. But the stock apears to be less risky and, when comparing its historical volatility, Black Hills is 1.24 times less risky than Pekin Life. The stock trades about -0.01 of its potential returns per unit of risk. The Pekin Life Insurance is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,175  in Pekin Life Insurance on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Pekin Life Insurance or generate 0.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Black Hills  vs.  Pekin Life Insurance

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.

Pekin Life Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Black Hills and Pekin Life

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

The idea behind Black Hills and Pekin Life Insurance 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.