Correlation Between Broadcom and Air Lease

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

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

Diversification Opportunities for Broadcom and Air Lease

0.48

Correlation Coefficient

Broadcom  Air Lease

Very weak diversification

The 3 months correlation between Broadcom and Air is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Broadcom i.e., Broadcom and Air Lease go up and down completely randomly.

Pair Corralation between Broadcom and Air Lease

Assuming the 90 days trading horizon Broadcom is expected to under-perform the Air Lease. In addition to that, Broadcom is 1.84 times more volatile than Air Lease. It trades about -0.15 of its total potential returns per unit of risk. Air Lease is currently generating about -0.02 per unit of volatility. If you would invest  4,598  in Air Lease on December 29, 2024 and sell it today you would lose (178.00) from holding Air Lease or give up 3.87% of portfolio value over 90 days.

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

Broadcom  vs.  Air Lease

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 fragile 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.

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Broadcom and Air Lease

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

The idea behind Broadcom and Air Lease 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.