Correlation Between Broadcom and Silex Systems

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

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

Diversification Opportunities for Broadcom and Silex Systems

0.57

Correlation Coefficient

Broadcom  Silex Systems

Very weak diversification

The 3 months correlation between Broadcom and Silex is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Silex Systems Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silex Systems 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 Silex Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silex Systems has no effect on the direction of Broadcom i.e., Broadcom and Silex Systems go up and down completely randomly.

Pair Corralation between Broadcom and Silex Systems

Given the investment horizon of 90 days Broadcom is expected to generate 0.91 times more return on investment than Silex Systems. However, Broadcom is 1.1 times less risky than Silex Systems. It trades about -0.03 of its potential returns per unit of risk. Silex Systems Ltd is currently generating about -0.05 per unit of risk. If you would invest  22,020  in Broadcom on December 20, 2024 and sell it today you would lose (2,463) from holding Broadcom or give up 11.19% of portfolio value over 90 days.

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

Broadcom  vs.  Silex Systems Ltd

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 latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Silex Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silex Systems Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Broadcom and Silex Systems

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

The idea behind Broadcom and Silex Systems Ltd 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 Anywhere module to track or share privately all of your investments from the convenience of any device.