Correlation Between Broadcom and Griffin Mining

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

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

Diversification Opportunities for Broadcom and Griffin Mining

-0.18

Correlation Coefficient

Broadcom  Griffin Mining

Good diversification

The 3 months correlation between Broadcom and Griffin is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Griffin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffin Mining and Broadcom 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 Broadcom are associated (or correlated) with Griffin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffin Mining has no effect on the direction of Broadcom i.e., Broadcom and Griffin Mining go up and down completely randomly.

Pair Corralation between Broadcom and Griffin Mining

Assuming the 90 days trading horizon Broadcom is expected to generate 46.93 times more return on investment than Griffin Mining. However, Broadcom is 46.93 times more volatile than Griffin Mining. It trades about 0.1 of its potential returns per unit of risk. Griffin Mining is currently generating about 0.08 per unit of risk. If you would invest  5,632  in Broadcom on October 3, 2024 and sell it today you would earn a total of  17,684  from holding Broadcom or generate 313.99% return on investment over 90 days.

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

Broadcom  vs.  Griffin Mining

Broadcom

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 11 (%) 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.

Griffin Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Griffin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Broadcom and Griffin Mining

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

The idea behind Broadcom and Griffin Mining 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.