Correlation Between Chuangs China and Broadwind

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

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

Diversification Opportunities for Chuangs China and Broadwind

0.46

Correlation Coefficient

Chuangs China  Broadwind

Very weak diversification

The 3 months correlation between Chuangs and Broadwind is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and Chuangs China 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 Chuangs China Investments 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 Chuangs China i.e., Chuangs China and Broadwind go up and down completely randomly.

Pair Corralation between Chuangs China and Broadwind

Assuming the 90 days horizon Chuangs China is expected to generate 2.06 times less return on investment than Broadwind. But when comparing it to its historical volatility, Chuangs China Investments is 1.38 times less risky than Broadwind. It trades about 0.12 of its potential returns per unit of risk. Broadwind is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  127.00  in Broadwind on April 25, 2025 and sell it today you would earn a total of  74.00  from holding Broadwind or generate 58.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chuangs China Investments  vs.  Broadwind

Chuangs China Investments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chuangs China Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chuangs China reported solid returns over the last few months and may actually be approaching a breakup point.

Broadwind

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadwind reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chuangs China and Broadwind

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

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.