Correlation Between ITALIAN WINE and BROADWIND ENRGY

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

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

Diversification Opportunities for ITALIAN WINE and BROADWIND ENRGY

-0.04

Correlation Coefficient

ITALIAN WINE  BROADWIND ENRGY

Good diversification

The 3 months correlation between ITALIAN and BROADWIND is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between ITALIAN WINE and BROADWIND ENRGY

Assuming the 90 days horizon ITALIAN WINE is expected to generate 1.43 times less return on investment than BROADWIND ENRGY. But when comparing it to its historical volatility, ITALIAN WINE BRANDS is 2.28 times less risky than BROADWIND ENRGY. It trades about 0.06 of its potential returns per unit of risk. BROADWIND ENRGY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  201.00  in BROADWIND ENRGY on October 9, 2024 and sell it today you would earn a total of  9.00  from holding BROADWIND ENRGY or generate 4.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

ITALIAN WINE BRANDS  vs.  BROADWIND ENRGY

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, ITALIAN WINE 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 ITALIAN WINE and BROADWIND ENRGY

The main advantage of trading using opposite ITALIAN WINE and BROADWIND ENRGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.