Correlation Between BLACK and Capital Clean

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

By analyzing existing cross correlation between BLACK HILLS P and Capital Clean Energy, you can compare the effects of market volatilities on BLACK and Capital Clean 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 with a short position of Capital Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLACK and Capital Clean.

Diversification Opportunities for BLACK and Capital Clean

0.13

Correlation Coefficient

BLACK  Capital Clean

Average diversification

The 3 months correlation between BLACK and Capital is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BLACK HILLS P and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy and BLACK 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 P are associated (or correlated) with Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of BLACK i.e., BLACK and Capital Clean go up and down completely randomly.

Pair Corralation between BLACK and Capital Clean

Assuming the 90 days trading horizon BLACK is expected to generate 31.72 times less return on investment than Capital Clean. But when comparing it to its historical volatility, BLACK HILLS P is 11.05 times less risky than Capital Clean. It trades about 0.03 of its potential returns per unit of risk. Capital Clean Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,825  in Capital Clean Energy on October 8, 2024 and sell it today you would earn a total of  33.00  from holding Capital Clean Energy or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.42%
Values	Daily Returns

BLACK HILLS P  vs.  Capital Clean Energy

BLACK HILLS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLACK HILLS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BLACK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Capital Clean Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BLACK and Capital Clean

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

The idea behind BLACK HILLS P and Capital Clean Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.