Correlation Between Broadcom and BIONTECH

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

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

Diversification Opportunities for Broadcom and BIONTECH

0.58

Correlation Coefficient

Broadcom  BIONTECH

Very weak diversification

The 3 months correlation between Broadcom and BIONTECH is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and BIONTECH SE DRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIONTECH SE DRN 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 BIONTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIONTECH SE DRN has no effect on the direction of Broadcom i.e., Broadcom and BIONTECH go up and down completely randomly.

Pair Corralation between Broadcom and BIONTECH

Assuming the 90 days trading horizon Broadcom is expected to generate 1.55 times more return on investment than BIONTECH. However, Broadcom is 1.55 times more volatile than BIONTECH SE DRN. It trades about 0.16 of its potential returns per unit of risk. BIONTECH SE DRN is currently generating about 0.06 per unit of risk. If you would invest  1,429  in Broadcom on October 23, 2024 and sell it today you would earn a total of  659.00  from holding Broadcom or generate 46.12% return on investment over 90 days.

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

Broadcom  vs.  BIONTECH SE DRN

Broadcom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Broadcom sustained solid returns over the last few months and may actually be approaching a breakup point.

BIONTECH SE DRN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BIONTECH SE DRN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BIONTECH may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Broadcom and BIONTECH

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

The idea behind Broadcom and BIONTECH SE DRN 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..