Correlation Between Fortive and BROADWIND ENRGY

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

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

Diversification Opportunities for Fortive and BROADWIND ENRGY

0.21

Correlation Coefficient

Fortive  BROADWIND ENRGY

Modest diversification

The 3 months correlation between Fortive and BROADWIND is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fortive and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY and Fortive 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 Fortive are associated (or correlated) with BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Fortive i.e., Fortive and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Fortive and BROADWIND ENRGY

Assuming the 90 days horizon Fortive is expected to generate 0.31 times more return on investment than BROADWIND ENRGY. However, Fortive is 3.27 times less risky than BROADWIND ENRGY. It trades about 0.11 of its potential returns per unit of risk. BROADWIND ENRGY is currently generating about 0.03 per unit of risk. If you would invest  6,965  in Fortive on October 24, 2024 and sell it today you would earn a total of  611.00  from holding Fortive or generate 8.77% return on investment over 90 days.

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

Fortive  vs.  BROADWIND ENRGY

Fortive

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Fortive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BROADWIND ENRGY

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Fortive and BROADWIND ENRGY

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

The idea behind Fortive and BROADWIND ENRGY 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.