Correlation Between AEGEAN AIRLINES and Broadcom

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

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

Diversification Opportunities for AEGEAN AIRLINES and Broadcom

0.12

Correlation Coefficient

AEGEAN AIRLINES  Broadcom

Average diversification

The 3 months correlation between AEGEAN and Broadcom is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and Broadcom go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and Broadcom

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 42.06 times less return on investment than Broadcom. But when comparing it to its historical volatility, AEGEAN AIRLINES is 2.03 times less risky than Broadcom. It trades about 0.01 of its potential returns per unit of risk. Broadcom is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,673  in Broadcom on October 8, 2024 and sell it today you would earn a total of  13,917  from holding Broadcom or generate 160.46% return on investment over 90 days.

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

AEGEAN AIRLINES  vs.  Broadcom

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AEGEAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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

Pair Trading with AEGEAN AIRLINES and Broadcom

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

The idea behind AEGEAN AIRLINES and Broadcom 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.