Correlation Between Broadwind Energy and Capstone Green

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

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

Diversification Opportunities for Broadwind Energy and Capstone Green

0.26

Correlation Coefficient

Broadwind Energy  Capstone Green

Modest diversification

The 3 months correlation between Broadwind and Capstone is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind Energy and Capstone Green Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Green Energy and Broadwind Energy 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 Energy are associated (or correlated) with Capstone Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Green Energy has no effect on the direction of Broadwind Energy i.e., Broadwind Energy and Capstone Green go up and down completely randomly.

Pair Corralation between Broadwind Energy and Capstone Green

Given the investment horizon of 90 days Broadwind Energy is expected to generate 0.53 times more return on investment than Capstone Green. However, Broadwind Energy is 1.88 times less risky than Capstone Green. It trades about 0.03 of its potential returns per unit of risk. Capstone Green Energy is currently generating about 0.0 per unit of risk. If you would invest  197.00  in Broadwind Energy on January 24, 2024 and sell it today you would earn a total of  21.00  from holding Broadwind Energy or generate 10.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.21%
Values	Daily Returns

Broadwind Energy  vs.  Capstone Green Energy

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.

Capstone Green Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Green Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Capstone Green is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Broadwind Energy and Capstone Green

The main advantage of trading using opposite Broadwind Energy and Capstone Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadwind Energy position performs unexpectedly, Capstone Green 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 Capstone Green will offset losses from the drop in Capstone Green's long position.

The idea behind Broadwind Energy and Capstone Green 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.