Correlation Between Broadwind and Microsoft
Can any of the company-specific risk be diversified away by investing in both Broadwind and Microsoft 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 Broadwind and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadwind and Microsoft, you can compare the effects of market volatilities on Broadwind and Microsoft 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 Broadwind with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadwind and Microsoft.
Diversification Opportunities for Broadwind and Microsoft
Good diversification
The 3 months correlation between Broadwind and Microsoft is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Broadwind 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 Broadwind are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Broadwind i.e., Broadwind and Microsoft go up and down completely randomly.
Pair Corralation between Broadwind and Microsoft
Assuming the 90 days trading horizon Broadwind is expected to generate 4.47 times more return on investment than Microsoft. However, Broadwind is 4.47 times more volatile than Microsoft. It trades about 0.15 of its potential returns per unit of risk. Microsoft is currently generating about 0.18 per unit of risk. If you would invest 143.00 in Broadwind on October 20, 2024 and sell it today you would earn a total of 35.00 from holding Broadwind or generate 24.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Broadwind vs. Microsoft
Performance |
Timeline |
Broadwind |
Microsoft |
Broadwind and Microsoft Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Broadwind and Microsoft
The main advantage of trading using opposite Broadwind and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadwind position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.Broadwind vs. Cairo Communication SpA | Broadwind vs. Highlight Communications AG | Broadwind vs. Chuangs China Investments | Broadwind vs. Scottish Mortgage Investment |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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