Correlation Between BROADWIND ENRGY and Bank of America

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

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

Diversification Opportunities for BROADWIND ENRGY and Bank of America

-0.75

Correlation Coefficient

BROADWIND ENRGY  Bank of America

Pay attention - limited upside

The 3 months correlation between BROADWIND and Bank is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BROADWIND ENRGY and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and BROADWIND ENRGY 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 ENRGY are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of BROADWIND ENRGY i.e., BROADWIND ENRGY and Bank of America go up and down completely randomly.

Pair Corralation between BROADWIND ENRGY and Bank of America

Assuming the 90 days trading horizon BROADWIND ENRGY is expected to under-perform the Bank of America. But the stock apears to be less risky and, when comparing its historical volatility, BROADWIND ENRGY is 1.5 times less risky than Bank of America. The stock trades about -0.28 of its potential returns per unit of risk. The Verizon Communications is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,126  in Verizon Communications on December 23, 2024 and sell it today you would lose (107.00) from holding Verizon Communications or give up 2.59% of portfolio value over 90 days.

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

BROADWIND ENRGY  vs.  Verizon Communications

BROADWIND ENRGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days BROADWIND ENRGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Verizon Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BROADWIND ENRGY and Bank of America

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

The idea behind BROADWIND ENRGY and Verizon Communications 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.