Can any of the company-specific risk be diversified away by investing in both Black Hills and Barrick Gold 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 Hills and Barrick Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Barrick Gold Corp, you can compare the effects of market volatilities on Black Hills and Barrick Gold 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 Hills with a short position of Barrick Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Barrick Gold.
Diversification Opportunities for Black Hills and Barrick Gold
The 3 months correlation between Black and Barrick is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold Corp and Black Hills 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 are associated (or correlated) with Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of Black Hills i.e., Black Hills and Barrick Gold go up and down completely randomly.
Pair Corralation between Black Hills and Barrick Gold
Considering the 90-day investment horizon Black Hills is expected to under-perform the Barrick Gold. But the stock apears to be less risky and, when comparing its historical volatility, Black Hills is 1.27 times less risky than Barrick Gold. The stock trades about -0.02 of its potential returns per unit of risk. The Barrick Gold Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,657 in Barrick Gold Corp on March 6, 2024 and sell it today you would earn a total of 85.00 from holding Barrick Gold Corp or generate 5.13% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward-looking signals, Black Hills may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Barrick Gold may actually be approaching a critical reversion point that can send shares even higher in July 2024.