Correlation Between BLACK and MYR

Can any of the company-specific risk be diversified away by investing in both BLACK and MYR 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 MYR 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 MYR Group, you can compare the effects of market volatilities on BLACK and MYR 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 MYR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLACK and MYR.

Diversification Opportunities for BLACK and MYR

-0.48

Correlation Coefficient

BLACK  MYR

Very good diversification

The 3 months correlation between BLACK and MYR is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BLACK HILLS P and MYR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYR Group 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 MYR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYR Group has no effect on the direction of BLACK i.e., BLACK and MYR go up and down completely randomly.

Pair Corralation between BLACK and MYR

Assuming the 90 days trading horizon BLACK HILLS P is expected to under-perform the MYR. But the bond apears to be less risky and, when comparing its historical volatility, BLACK HILLS P is 2.34 times less risky than MYR. The bond trades about -0.24 of its potential returns per unit of risk. The MYR Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  15,877  in MYR Group on September 27, 2024 and sell it today you would lose (546.00) from holding MYR Group or give up 3.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.82%
Values	Daily Returns

BLACK HILLS P  vs.  MYR Group

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 current stock price disturbance, may contribute to short-term losses for the investors.

MYR Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MYR Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, MYR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BLACK and MYR

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

The idea behind BLACK HILLS P and MYR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.