Correlation Between EnLink and Black Hills

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

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

Diversification Opportunities for EnLink and Black Hills

-0.26

Correlation Coefficient

EnLink  Black Hills

Very good diversification

The 3 months correlation between EnLink and Black is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream Partners and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and EnLink 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 EnLink Midstream Partners 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 EnLink i.e., EnLink and Black Hills go up and down completely randomly.

Pair Corralation between EnLink and Black Hills

Assuming the 90 days trading horizon EnLink Midstream Partners is expected to generate 0.25 times more return on investment than Black Hills. However, EnLink Midstream Partners is 3.97 times less risky than Black Hills. It trades about -0.1 of its potential returns per unit of risk. Black Hills is currently generating about -0.03 per unit of risk. If you would invest  9,951  in EnLink Midstream Partners on November 30, 2024 and sell it today you would lose (170.00) from holding EnLink Midstream Partners or give up 1.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

EnLink Midstream Partners  vs.  Black Hills

EnLink Midstream Partners

Risk-Adjusted Performance

Very Weak

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

Black Hills

Risk-Adjusted Performance

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 EnLink and Black Hills

The main advantage of trading using opposite EnLink and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnLink 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 EnLink Midstream Partners 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.