Correlation Between Broadcom and CaixaBank

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

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

Diversification Opportunities for Broadcom and CaixaBank

-0.67

Correlation Coefficient

Broadcom  CaixaBank

Excellent diversification

The 3 months correlation between Broadcom and CaixaBank is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and CaixaBank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaixaBank SA 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 CaixaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaixaBank SA has no effect on the direction of Broadcom i.e., Broadcom and CaixaBank go up and down completely randomly.

Pair Corralation between Broadcom and CaixaBank

Assuming the 90 days trading horizon Broadcom is expected to under-perform the CaixaBank. In addition to that, Broadcom is 1.55 times more volatile than CaixaBank SA. It trades about -0.08 of its total potential returns per unit of risk. CaixaBank SA is currently generating about 0.25 per unit of volatility. If you would invest  512.00  in CaixaBank SA on December 23, 2024 and sell it today you would earn a total of  209.00  from holding CaixaBank SA or generate 40.82% return on investment over 90 days.

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

Broadcom  vs.  CaixaBank SA

Broadcom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Broadcom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CaixaBank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CaixaBank SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, CaixaBank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadcom and CaixaBank

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

The idea behind Broadcom and CaixaBank SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.