Correlation Between Arconic and Broadwind Energy

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

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

Diversification Opportunities for Arconic and Broadwind Energy

-0.31

Correlation Coefficient

Arconic  Broadwind Energy

Very good diversification

The 3 months correlation between Arconic and Broadwind is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Arconic and Broadwind Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind Energy and Arconic 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 Arconic 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 Arconic i.e., Arconic and Broadwind Energy go up and down completely randomly.

Pair Corralation between Arconic and Broadwind Energy

If you would invest  2,999  in Arconic on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Arconic or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Arconic  vs.  Broadwind Energy

Arconic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arconic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Broadwind Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadwind Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Arconic and Broadwind Energy

The main advantage of trading using opposite Arconic and Broadwind Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arconic 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.

The idea behind Arconic and Broadwind Energy 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.