Correlation Between Broadwind and WILLIS LEASE

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

By analyzing existing cross correlation between Broadwind and WILLIS LEASE FIN, you can compare the effects of market volatilities on Broadwind and WILLIS LEASE 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 WILLIS LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadwind and WILLIS LEASE.

Diversification Opportunities for Broadwind and WILLIS LEASE

0.06

Correlation Coefficient

Broadwind  WILLIS LEASE

Significant diversification

The 3 months correlation between Broadwind and WILLIS is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Broadwind i.e., Broadwind and WILLIS LEASE go up and down completely randomly.

Pair Corralation between Broadwind and WILLIS LEASE

Assuming the 90 days trading horizon Broadwind is expected to generate 11.85 times less return on investment than WILLIS LEASE. In addition to that, Broadwind is 1.15 times more volatile than WILLIS LEASE FIN. It trades about 0.0 of its total potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.05 per unit of volatility. If you would invest  16,980  in WILLIS LEASE FIN on October 26, 2024 and sell it today you would earn a total of  1,320  from holding WILLIS LEASE FIN or generate 7.77% return on investment over 90 days.

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

Broadwind  vs.  WILLIS LEASE FIN

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.

WILLIS LEASE FIN

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadwind and WILLIS LEASE

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

The idea behind Broadwind and WILLIS LEASE FIN 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.