Correlation Between Aluminumof China and Broadwind

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

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

Diversification Opportunities for Aluminumof China and Broadwind

0.59

Correlation Coefficient

Aluminumof China  Broadwind

Very weak diversification

The 3 months correlation between Aluminumof and Broadwind is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and Aluminumof China 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 Aluminum of are associated (or correlated) with Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Aluminumof China i.e., Aluminumof China and Broadwind go up and down completely randomly.

Pair Corralation between Aluminumof China and Broadwind

Assuming the 90 days horizon Aluminum of is expected to under-perform the Broadwind. But the stock apears to be less risky and, when comparing its historical volatility, Aluminum of is 1.06 times less risky than Broadwind. The stock trades about -0.01 of its potential returns per unit of risk. The Broadwind is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Broadwind on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Broadwind or generate 2.13% return on investment over 90 days.

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

Aluminum of  vs.  Broadwind

Aluminumof China

Risk-Adjusted Performance

0 of 100

Very Weak

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

Broadwind

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadwind may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aluminumof China and Broadwind

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

The idea behind Aluminum of and Broadwind 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.