Correlation Between CGN Power and Broadwind

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

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

Diversification Opportunities for CGN Power and Broadwind

-0.32

Correlation Coefficient

CGN Power  Broadwind

Very good diversification

The 3 months correlation between CGN and Broadwind is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CGN Power Co and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and CGN Power 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 CGN Power Co 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 CGN Power i.e., CGN Power and Broadwind go up and down completely randomly.

Pair Corralation between CGN Power and Broadwind

Assuming the 90 days horizon CGN Power Co is expected to generate 2.55 times more return on investment than Broadwind. However, CGN Power is 2.55 times more volatile than Broadwind. It trades about 0.08 of its potential returns per unit of risk. Broadwind is currently generating about -0.02 per unit of risk. If you would invest  6.99  in CGN Power Co on October 4, 2024 and sell it today you would earn a total of  21.01  from holding CGN Power Co or generate 300.57% return on investment over 90 days.

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

CGN Power Co  vs.  Broadwind

CGN Power

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CGN Power Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CGN Power reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Broadwind is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CGN Power and Broadwind

The main advantage of trading using opposite CGN Power and Broadwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGN Power 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 CGN Power Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.