Correlation Between SSP Group and Broadcom

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

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

Diversification Opportunities for SSP Group and Broadcom

0.6

Correlation Coefficient

SSP Group  Broadcom

Poor diversification

The 3 months correlation between SSP and Broadcom is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SSP Group PLC and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and SSP Group 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 SSP Group PLC 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 SSP Group i.e., SSP Group and Broadcom go up and down completely randomly.

Pair Corralation between SSP Group and Broadcom

Assuming the 90 days trading horizon SSP Group PLC is expected to under-perform the Broadcom. But the stock apears to be less risky and, when comparing its historical volatility, SSP Group PLC is 1.44 times less risky than Broadcom. The stock trades about 0.0 of its potential returns per unit of risk. The Broadcom is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,622  in Broadcom on October 11, 2024 and sell it today you would earn a total of  13,568  from holding Broadcom or generate 157.36% return on investment over 90 days.

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

SSP Group PLC  vs.  Broadcom

SSP Group PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSP Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SSP Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Broadcom

Risk-Adjusted Performance

11 of 100

OK

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

Pair Trading with SSP Group and Broadcom

The main advantage of trading using opposite SSP Group and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSP Group 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 SSP Group PLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.