Correlation Between BROADWIND ENRGY and Penske Automotive

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

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

Diversification Opportunities for BROADWIND ENRGY and Penske Automotive

-0.51

Correlation Coefficient

BROADWIND ENRGY  Penske Automotive

Excellent diversification

The 3 months correlation between BROADWIND and Penske is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding BROADWIND ENRGY and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive 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 Penske Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penske Automotive has no effect on the direction of BROADWIND ENRGY i.e., BROADWIND ENRGY and Penske Automotive go up and down completely randomly.

Pair Corralation between BROADWIND ENRGY and Penske Automotive

Assuming the 90 days trading horizon BROADWIND ENRGY is expected to generate 3.02 times more return on investment than Penske Automotive. However, BROADWIND ENRGY is 3.02 times more volatile than Penske Automotive Group. It trades about 0.18 of its potential returns per unit of risk. Penske Automotive Group is currently generating about 0.13 per unit of risk. If you would invest  171.00  in BROADWIND ENRGY on October 22, 2024 and sell it today you would earn a total of  19.00  from holding BROADWIND ENRGY or generate 11.11% return on investment over 90 days.

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

BROADWIND ENRGY  vs.  Penske Automotive Group

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Penske Automotive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penske Automotive Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Penske Automotive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BROADWIND ENRGY and Penske Automotive

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

The idea behind BROADWIND ENRGY and Penske Automotive Group 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.