Correlation Between Broadcom and Svenska Handelsbanken

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

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

Diversification Opportunities for Broadcom and Svenska Handelsbanken

0.49

Correlation Coefficient

Broadcom  Svenska Handelsbanken

Very weak diversification

The 3 months correlation between Broadcom and Svenska is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken 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 Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of Broadcom i.e., Broadcom and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between Broadcom and Svenska Handelsbanken

Assuming the 90 days trading horizon Broadcom is expected to generate 0.69 times more return on investment than Svenska Handelsbanken. However, Broadcom is 1.44 times less risky than Svenska Handelsbanken. It trades about 0.12 of its potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.07 per unit of risk. If you would invest  5,089  in Broadcom on October 10, 2024 and sell it today you would earn a total of  17,251  from holding Broadcom or generate 338.99% return on investment over 90 days.

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

Broadcom  vs.  Svenska Handelsbanken AB

Broadcom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Svenska Handelsbanken

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Svenska Handelsbanken reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadcom and Svenska Handelsbanken

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

The idea behind Broadcom and Svenska Handelsbanken AB 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.