Correlation Between Broadwind and Nippon Light

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

By analyzing existing cross correlation between Broadwind and Nippon Light Metal, you can compare the effects of market volatilities on Broadwind and Nippon Light 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 Nippon Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadwind and Nippon Light.

Diversification Opportunities for Broadwind and Nippon Light

0.49

Correlation Coefficient

Broadwind  Nippon Light

Very weak diversification

The 3 months correlation between Broadwind and Nippon is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal 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 Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of Broadwind i.e., Broadwind and Nippon Light go up and down completely randomly.

Pair Corralation between Broadwind and Nippon Light

Assuming the 90 days trading horizon Broadwind is expected to generate 4.57 times more return on investment than Nippon Light. However, Broadwind is 4.57 times more volatile than Nippon Light Metal. It trades about 0.18 of its potential returns per unit of risk. Nippon Light Metal is currently generating about 0.15 per unit of risk. If you would invest  133.00  in Broadwind on May 7, 2025 and sell it today you would earn a total of  84.00  from holding Broadwind or generate 63.16% return on investment over 90 days.

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

Broadwind  vs.  Nippon Light Metal

Broadwind

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 14 (%) 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.

Nippon Light Metal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Light Metal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nippon Light may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Broadwind and Nippon Light

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

The idea behind Broadwind and Nippon Light Metal 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.