Correlation Between St Galler and Broadcom

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

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

Diversification Opportunities for St Galler and Broadcom

0.55

Correlation Coefficient

St Galler  Broadcom

Very weak diversification

The 3 months correlation between 0QQZ and Broadcom is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding St Galler Kantonalbank and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and St Galler 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 St Galler Kantonalbank are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of St Galler i.e., St Galler and Broadcom go up and down completely randomly.

Pair Corralation between St Galler and Broadcom

Assuming the 90 days trading horizon St Galler Kantonalbank is expected to under-perform the Broadcom. But the stock apears to be less risky and, when comparing its historical volatility, St Galler Kantonalbank is 130.9 times less risky than Broadcom. The stock trades about -0.02 of its potential returns per unit of risk. The Broadcom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,804  in Broadcom on October 26, 2024 and sell it today you would earn a total of  18,815  from holding Broadcom or generate 324.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

St Galler Kantonalbank  vs.  Broadcom

St Galler Kantonalbank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Broadcom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St Galler and Broadcom

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

The idea behind St Galler Kantonalbank and Broadcom 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.