Correlation Between Integrated Wind and Goodtech

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

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

Diversification Opportunities for Integrated Wind and Goodtech

0.24

Correlation Coefficient

Integrated Wind  Goodtech

Modest diversification

The 3 months correlation between Integrated and Goodtech is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Wind Solutions and Goodtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodtech and Integrated Wind 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 Integrated Wind Solutions are associated (or correlated) with Goodtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodtech has no effect on the direction of Integrated Wind i.e., Integrated Wind and Goodtech go up and down completely randomly.

Pair Corralation between Integrated Wind and Goodtech

Assuming the 90 days trading horizon Integrated Wind Solutions is expected to generate 1.01 times more return on investment than Goodtech. However, Integrated Wind is 1.01 times more volatile than Goodtech. It trades about -0.01 of its potential returns per unit of risk. Goodtech is currently generating about -0.09 per unit of risk. If you would invest  4,700  in Integrated Wind Solutions on September 13, 2024 and sell it today you would lose (120.00) from holding Integrated Wind Solutions or give up 2.55% of portfolio value over 90 days.

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

Integrated Wind Solutions  vs.  Goodtech

Integrated Wind Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Wind Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Integrated Wind is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Integrated Wind and Goodtech

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

The idea behind Integrated Wind Solutions and Goodtech 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.