Correlation Between Broadcom and Lumina Gold

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

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

Diversification Opportunities for Broadcom and Lumina Gold

-0.51

Correlation Coefficient

Broadcom  Lumina Gold

Excellent diversification

The 3 months correlation between Broadcom and Lumina is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Lumina Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumina Gold Corp 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 Lumina Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumina Gold Corp has no effect on the direction of Broadcom i.e., Broadcom and Lumina Gold go up and down completely randomly.

Pair Corralation between Broadcom and Lumina Gold

Assuming the 90 days trading horizon Broadcom is expected to under-perform the Lumina Gold. But the stock apears to be less risky and, when comparing its historical volatility, Broadcom is 1.02 times less risky than Lumina Gold. The stock trades about -0.13 of its potential returns per unit of risk. The Lumina Gold Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Lumina Gold Corp on December 28, 2024 and sell it today you would earn a total of  16.00  from holding Lumina Gold Corp or generate 34.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Broadcom  vs.  Lumina Gold Corp

Broadcom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Broadcom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lumina Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumina Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lumina Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadcom and Lumina Gold

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

The idea behind Broadcom and Lumina Gold Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.