Correlation Between Broadcom and KEYCORP

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

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

Diversification Opportunities for Broadcom and KEYCORP

-0.22

Correlation Coefficient

Broadcom  KEYCORP

Very good diversification

The 3 months correlation between Broadcom and KEYCORP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and KEYCORP MEDIUM TERM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MEDIUM TERM 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 KEYCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP MEDIUM TERM has no effect on the direction of Broadcom i.e., Broadcom and KEYCORP go up and down completely randomly.

Pair Corralation between Broadcom and KEYCORP

Given the investment horizon of 90 days Broadcom is expected to under-perform the KEYCORP. In addition to that, Broadcom is 11.14 times more volatile than KEYCORP MEDIUM TERM. It trades about -0.09 of its total potential returns per unit of risk. KEYCORP MEDIUM TERM is currently generating about -0.09 per unit of volatility. If you would invest  9,936  in KEYCORP MEDIUM TERM on December 25, 2024 and sell it today you would lose (182.00) from holding KEYCORP MEDIUM TERM or give up 1.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Broadcom  vs.  KEYCORP MEDIUM TERM

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

KEYCORP MEDIUM TERM

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEYCORP MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYCORP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Broadcom and KEYCORP

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

The idea behind Broadcom and KEYCORP MEDIUM TERM 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.