Correlation Between Broadwind and PULSION Medical

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

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

Diversification Opportunities for Broadwind and PULSION Medical

-0.58

Correlation Coefficient

Broadwind  PULSION Medical

Excellent diversification

The 3 months correlation between Broadwind and PULSION is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind and PULSION Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PULSION Medical Systems and Broadwind 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 Broadwind are associated (or correlated) with PULSION Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PULSION Medical Systems has no effect on the direction of Broadwind i.e., Broadwind and PULSION Medical go up and down completely randomly.

Pair Corralation between Broadwind and PULSION Medical

Assuming the 90 days trading horizon Broadwind is expected to generate 1.3 times less return on investment than PULSION Medical. In addition to that, Broadwind is 6.69 times more volatile than PULSION Medical Systems. It trades about 0.0 of its total potential returns per unit of risk. PULSION Medical Systems is currently generating about 0.03 per unit of volatility. If you would invest  1,600  in PULSION Medical Systems on October 26, 2024 and sell it today you would earn a total of  20.00  from holding PULSION Medical Systems or generate 1.25% return on investment over 90 days.

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

Broadwind  vs.  PULSION Medical Systems

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.

PULSION Medical Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PULSION Medical Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PULSION Medical 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 Broadwind and PULSION Medical

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

The idea behind Broadwind and PULSION Medical Systems 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.