Correlation Between Microsoft and BROADWIND ENRGY

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

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

Diversification Opportunities for Microsoft and BROADWIND ENRGY

-0.45

Correlation Coefficient

Microsoft  BROADWIND ENRGY

Very good diversification

The 3 months correlation between Microsoft and BROADWIND is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY and Microsoft 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 Microsoft are associated (or correlated) with BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Microsoft i.e., Microsoft and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Microsoft and BROADWIND ENRGY

Assuming the 90 days trading horizon Microsoft is expected to generate 0.27 times more return on investment than BROADWIND ENRGY. However, Microsoft is 3.73 times less risky than BROADWIND ENRGY. It trades about 0.27 of its potential returns per unit of risk. BROADWIND ENRGY is currently generating about 0.03 per unit of risk. If you would invest  37,461  in Microsoft on September 5, 2024 and sell it today you would earn a total of  3,329  from holding Microsoft or generate 8.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Microsoft  vs.  BROADWIND ENRGY

Microsoft

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BROADWIND ENRGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BROADWIND ENRGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BROADWIND ENRGY is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and BROADWIND ENRGY

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

The idea behind Microsoft and BROADWIND ENRGY 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 Stocks Directory module to find actively traded stocks across global markets.