Correlation Between Kingspan Group and Broadwind

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

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

Diversification Opportunities for Kingspan Group and Broadwind

0.46

Correlation Coefficient

Kingspan Group  Broadwind

Very weak diversification

The 3 months correlation between Kingspan and Broadwind is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group plc and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and Kingspan Group 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 Kingspan Group plc 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 Kingspan Group i.e., Kingspan Group and Broadwind go up and down completely randomly.

Pair Corralation between Kingspan Group and Broadwind

Assuming the 90 days horizon Kingspan Group plc is expected to under-perform the Broadwind. But the stock apears to be less risky and, when comparing its historical volatility, Kingspan Group plc is 2.37 times less risky than Broadwind. The stock trades about -0.05 of its potential returns per unit of risk. The Broadwind is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  164.00  in Broadwind on October 12, 2024 and sell it today you would earn a total of  29.00  from holding Broadwind or generate 17.68% return on investment over 90 days.

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

Kingspan Group plc  vs.  Broadwind

Kingspan Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingspan Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 unsteady basic indicators, Broadwind may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kingspan Group and Broadwind

The main advantage of trading using opposite Kingspan Group and Broadwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingspan Group 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 Kingspan Group plc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.