Correlation Between CAIRN HOMES and Broadwind

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

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

Diversification Opportunities for CAIRN HOMES and Broadwind

0.03

Correlation Coefficient

CAIRN HOMES  Broadwind

Significant diversification

The 3 months correlation between CAIRN and Broadwind is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and CAIRN HOMES 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 CAIRN HOMES EO 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 CAIRN HOMES i.e., CAIRN HOMES and Broadwind go up and down completely randomly.

Pair Corralation between CAIRN HOMES and Broadwind

Assuming the 90 days horizon CAIRN HOMES EO is expected to under-perform the Broadwind. But the stock apears to be less risky and, when comparing its historical volatility, CAIRN HOMES EO is 2.12 times less risky than Broadwind. The stock trades about -0.27 of its potential returns per unit of risk. The Broadwind is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Broadwind on October 25, 2024 and sell it today you would lose (12.00) from holding Broadwind or give up 6.74% of portfolio value over 90 days.

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

CAIRN HOMES EO  vs.  Broadwind

CAIRN HOMES EO

Risk-Adjusted Performance

0 of 100

Weak

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

Broadwind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CAIRN HOMES and Broadwind

The main advantage of trading using opposite CAIRN HOMES and Broadwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAIRN HOMES 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 CAIRN HOMES EO 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.