Correlation Between BROADWIND ENRGY and United Utilities

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

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

Diversification Opportunities for BROADWIND ENRGY and United Utilities

0.34

Correlation Coefficient

BROADWIND ENRGY  United Utilities

Weak diversification

The 3 months correlation between BROADWIND and United is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BROADWIND ENRGY and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of BROADWIND ENRGY i.e., BROADWIND ENRGY and United Utilities go up and down completely randomly.

Pair Corralation between BROADWIND ENRGY and United Utilities

Assuming the 90 days trading horizon BROADWIND ENRGY is expected to under-perform the United Utilities. In addition to that, BROADWIND ENRGY is 1.72 times more volatile than United Utilities Group. It trades about -0.13 of its total potential returns per unit of risk. United Utilities Group is currently generating about -0.05 per unit of volatility. If you would invest  1,260  in United Utilities Group on December 24, 2024 and sell it today you would lose (80.00) from holding United Utilities Group or give up 6.35% of portfolio value over 90 days.

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

BROADWIND ENRGY  vs.  United Utilities Group

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.

United Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, United Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BROADWIND ENRGY and United Utilities

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

The idea behind BROADWIND ENRGY and United Utilities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.