Correlation Between Broadway Financial and Ideal Power

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

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

Diversification Opportunities for Broadway Financial and Ideal Power

-0.31

Correlation Coefficient

Broadway Financial  Ideal Power

Very good diversification

The 3 months correlation between Broadway and Ideal is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Broadway Financial and Ideal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideal Power and Broadway Financial 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 Broadway Financial are associated (or correlated) with Ideal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideal Power has no effect on the direction of Broadway Financial i.e., Broadway Financial and Ideal Power go up and down completely randomly.

Pair Corralation between Broadway Financial and Ideal Power

Given the investment horizon of 90 days Broadway Financial is expected to generate 0.46 times more return on investment than Ideal Power. However, Broadway Financial is 2.16 times less risky than Ideal Power. It trades about 0.07 of its potential returns per unit of risk. Ideal Power is currently generating about -0.03 per unit of risk. If you would invest  686.00  in Broadway Financial on September 5, 2024 and sell it today you would earn a total of  25.00  from holding Broadway Financial or generate 3.64% return on investment over 90 days.

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

Broadway Financial  vs.  Ideal Power

Broadway Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadway Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Broadway Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ideal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Broadway Financial and Ideal Power

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

The idea behind Broadway Financial and Ideal Power 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.