Correlation Between Black Hills and Vifor Pharma

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

By analyzing existing cross correlation between Black Hills and Vifor Pharma AG, you can compare the effects of market volatilities on Black Hills and Vifor Pharma 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 Vifor Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Vifor Pharma.

Diversification Opportunities for Black Hills and Vifor Pharma

0.4

Correlation Coefficient

Black Hills  Vifor Pharma

Very weak diversification

The 3 months correlation between Black and Vifor is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Vifor Pharma AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vifor Pharma AG 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 Vifor Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vifor Pharma AG has no effect on the direction of Black Hills i.e., Black Hills and Vifor Pharma go up and down completely randomly.

Pair Corralation between Black Hills and Vifor Pharma

Considering the 90-day investment horizon Black Hills is expected to generate 25.43 times less return on investment than Vifor Pharma. But when comparing it to its historical volatility, Black Hills is 1.96 times less risky than Vifor Pharma. It trades about 0.0 of its potential returns per unit of risk. Vifor Pharma AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,480  in Vifor Pharma AG on June 21, 2024 and sell it today you would earn a total of  359.00  from holding Vifor Pharma AG or generate 10.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	14.78%
Values	Daily Returns

Black Hills  vs.  Vifor Pharma AG

Black Hills

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward-looking signals, Black Hills demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Vifor Pharma AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vifor Pharma AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vifor Pharma is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Black Hills and Vifor Pharma

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

The idea behind Black Hills and Vifor Pharma AG 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..