Correlation Between SpareBank and Black Hills

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

By analyzing existing cross correlation between SpareBank 1 SR Bank and Black Hills, you can compare the effects of market volatilities on SpareBank and Black Hills 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 SpareBank with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of SpareBank and Black Hills.

Diversification Opportunities for SpareBank and Black Hills

0.0

Correlation Coefficient

SpareBank  Black Hills

Pay attention - limited upside

The 3 months correlation between SpareBank and Black is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SpareBank 1 SR Bank and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and SpareBank 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 SpareBank 1 SR Bank are associated (or correlated) with Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of SpareBank i.e., SpareBank and Black Hills go up and down completely randomly.

Pair Corralation between SpareBank and Black Hills

If you would invest  5,299  in Black Hills on September 21, 2024 and sell it today you would earn a total of  506.00  from holding Black Hills or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SpareBank 1 SR Bank  vs.  Black Hills

SpareBank 1 SR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SpareBank 1 SR Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, SpareBank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with SpareBank and Black Hills

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

The idea behind SpareBank 1 SR Bank and Black Hills 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.

Check out your portfolio center.

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.