Correlation Between Gates Industrial and Broadwind Energy
Can any of the company-specific risk be diversified away by investing in both Gates Industrial and Broadwind Energy 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 Gates Industrial and Broadwind Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gates Industrial and Broadwind Energy, you can compare the effects of market volatilities on Gates Industrial and Broadwind Energy 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 Gates Industrial with a short position of Broadwind Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gates Industrial and Broadwind Energy.
Diversification Opportunities for Gates Industrial and Broadwind Energy
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gates and Broadwind is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Broadwind Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind Energy and Gates Industrial 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 Gates Industrial are associated (or correlated) with Broadwind Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind Energy has no effect on the direction of Gates Industrial i.e., Gates Industrial and Broadwind Energy go up and down completely randomly.
Pair Corralation between Gates Industrial and Broadwind Energy
Given the investment horizon of 90 days Gates Industrial is expected to generate 0.77 times more return on investment than Broadwind Energy. However, Gates Industrial is 1.3 times less risky than Broadwind Energy. It trades about 0.17 of its potential returns per unit of risk. Broadwind Energy is currently generating about -0.17 per unit of risk. If you would invest 2,049 in Gates Industrial on November 18, 2024 and sell it today you would earn a total of 216.00 from holding Gates Industrial or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gates Industrial vs. Broadwind Energy
Performance |
| Timeline |
| Gates Industrial |
| Broadwind Energy |
Gates Industrial and Broadwind Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gates Industrial and Broadwind Energy
The main advantage of trading using opposite Gates Industrial and Broadwind Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gates Industrial position performs unexpectedly, Broadwind Energy 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 Energy will offset losses from the drop in Broadwind Energy's long position.| Gates Industrial vs. Crane NXT Co | Gates Industrial vs. Donaldson | Gates Industrial vs. ITT Inc | Gates Industrial vs. Franklin Electric Co |
| Broadwind Energy vs. Thermon Group Holdings | Broadwind Energy vs. Enpro Industries | Broadwind Energy vs. Gates Industrial | Broadwind Energy vs. Watts Water Technologies |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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