Correlation Between Broadcom and Brunswick Exploration

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

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

Diversification Opportunities for Broadcom and Brunswick Exploration

-0.48

Correlation Coefficient

Broadcom  Brunswick Exploration

Very good diversification

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

Pair Corralation between Broadcom and Brunswick Exploration

Assuming the 90 days trading horizon Broadcom is expected to generate 0.83 times more return on investment than Brunswick Exploration. However, Broadcom is 1.21 times less risky than Brunswick Exploration. It trades about 0.08 of its potential returns per unit of risk. Brunswick Exploration is currently generating about -0.03 per unit of risk. If you would invest  3,965  in Broadcom on December 2, 2024 and sell it today you would earn a total of  774.00  from holding Broadcom or generate 19.52% 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.  Brunswick Exploration

Broadcom

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Broadcom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brunswick Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brunswick Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Broadcom and Brunswick Exploration

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

The idea behind Broadcom and Brunswick Exploration 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.