Correlation Between Computer and Broadwind

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

By analyzing existing cross correlation between Computer And Technologies and Broadwind, you can compare the effects of market volatilities on Computer and Broadwind 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 Computer with a short position of Broadwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer and Broadwind.

Diversification Opportunities for Computer and Broadwind

0.66

Correlation Coefficient

Computer  Broadwind

Poor diversification

The 3 months correlation between Computer and Broadwind is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Computer And Technologies and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and Computer 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 Computer And Technologies are associated (or correlated) with Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Computer i.e., Computer and Broadwind go up and down completely randomly.

Pair Corralation between Computer and Broadwind

Assuming the 90 days horizon Computer And Technologies is expected to under-perform the Broadwind. But the stock apears to be less risky and, when comparing its historical volatility, Computer And Technologies is 1.96 times less risky than Broadwind. The stock trades about -0.11 of its potential returns per unit of risk. The Broadwind is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  189.00  in Broadwind on September 29, 2024 and sell it today you would lose (23.00) from holding Broadwind or give up 12.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Computer And Technologies  vs.  Broadwind

Computer And Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer And Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Broadwind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadwind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Computer and Broadwind

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

The idea behind Computer And Technologies and Broadwind 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.