Correlation Between GPT and Broadwind
Can any of the company-specific risk be diversified away by investing in both GPT 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 GPT and Broadwind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GPT Group and Broadwind, you can compare the effects of market volatilities on GPT 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 GPT with a short position of Broadwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of GPT and Broadwind.
Diversification Opportunities for GPT and Broadwind
Poor diversification
The 3 months correlation between GPT and Broadwind is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GPT Group and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and GPT 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 GPT Group 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 GPT i.e., GPT and Broadwind go up and down completely randomly.
Pair Corralation between GPT and Broadwind
Assuming the 90 days horizon GPT is expected to generate 1.25 times less return on investment than Broadwind. But when comparing it to its historical volatility, GPT Group is 1.57 times less risky than Broadwind. It trades about 0.03 of its potential returns per unit of risk. Broadwind is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 175.00 in Broadwind on September 4, 2024 and sell it today you would lose (2.00) from holding Broadwind or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
GPT Group vs. Broadwind
Performance |
| Timeline |
| GPT Group |
| Broadwind |
GPT and Broadwind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GPT and Broadwind
The main advantage of trading using opposite GPT and Broadwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT 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 GPT Group 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.| Broadwind vs. MINCO SILVER | Broadwind vs. Ming Le Sports | Broadwind vs. GRIFFIN MINING LTD | Broadwind vs. CI GAMES SA |
Check out your portfolio center.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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