Correlation Between Broadcom and Boa Safra

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

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

Diversification Opportunities for Broadcom and Boa Safra

-0.77

Correlation Coefficient

Broadcom  Boa Safra

Pay attention - limited upside

The 3 months correlation between Broadcom and Boa is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Boa Safra Sementes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boa Safra Sementes 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 Boa Safra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boa Safra Sementes has no effect on the direction of Broadcom i.e., Broadcom and Boa Safra go up and down completely randomly.

Pair Corralation between Broadcom and Boa Safra

Assuming the 90 days trading horizon Broadcom is expected to under-perform the Boa Safra. But the stock apears to be less risky and, when comparing its historical volatility, Broadcom is 1.16 times less risky than Boa Safra. The stock trades about -0.22 of its potential returns per unit of risk. The Boa Safra Sementes is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,018  in Boa Safra Sementes on October 26, 2024 and sell it today you would lose (3.00) from holding Boa Safra Sementes or give up 0.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Broadcom  vs.  Boa Safra Sementes

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.

Boa Safra Sementes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boa Safra Sementes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Broadcom and Boa Safra

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

The idea behind Broadcom and Boa Safra Sementes 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.