Correlation Between Broadcom and PT Bank

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

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

Diversification Opportunities for Broadcom and PT Bank

-0.43

Correlation Coefficient

Broadcom  PT Bank

Very good diversification

The 3 months correlation between Broadcom and BYRA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Broadcom i.e., Broadcom and PT Bank go up and down completely randomly.

Pair Corralation between Broadcom and PT Bank

Assuming the 90 days trading horizon Broadcom is expected to generate 1.04 times more return on investment than PT Bank. However, Broadcom is 1.04 times more volatile than PT Bank Rakyat. It trades about 0.19 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.02 per unit of risk. If you would invest  15,841  in Broadcom on September 27, 2024 and sell it today you would earn a total of  6,399  from holding Broadcom or generate 40.4% return on investment over 90 days.

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

Broadcom  vs.  PT Bank Rakyat

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 unsteady fundamental indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Broadcom and PT Bank

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

The idea behind Broadcom and PT Bank Rakyat 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.