Correlation Between Entergy Corp and Black Hills

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Can any of the company-specific risk be diversified away by investing in both Entergy Corp 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 Entergy Corp and Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy Corp and Black Hills Corp, you can compare the effects of market volatilities on Entergy Corp 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 Entergy Corp with a short position of Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy Corp and Black Hills.

Diversification Opportunities for Entergy Corp and Black Hills

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Entergy and Black is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Corp and Black Hills Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills Corp and Entergy Corp 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 Entergy Corp 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 Corp has no effect on the direction of Entergy Corp i.e., Entergy Corp and Black Hills go up and down completely randomly.

Pair Corralation between Entergy Corp and Black Hills

Considering the 90-day investment horizon Entergy Corp is expected to under-perform the Black Hills. In addition to that, Entergy Corp is 1.11 times more volatile than Black Hills Corp. It trades about -0.25 of its total potential returns per unit of risk. Black Hills Corp is currently generating about -0.25 per unit of volatility. If you would invest  7,792  in Black Hills Corp on June 30, 2022 and sell it today you would lose (672.00)  from holding Black Hills Corp or give up 8.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Entergy Corp  vs.  Black Hills Corp

 Performance (%) 
       Timeline  
Entergy Corp 
Entergy Performance
0 of 100
Over the last 90 days Entergy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entergy Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Entergy Price Channel

Black Hills Corp 
Black Performance
0 of 100
Over the last 90 days Black Hills Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Black Price Channel

Entergy Corp and Black Hills Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Entergy Corp and Black Hills

The main advantage of trading using opposite Entergy Corp and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Corp 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.
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The idea behind Entergy Corp and Black Hills Corp 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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