Correlation Between Broadcom and Walmart

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

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

Diversification Opportunities for Broadcom and Walmart

0.64

Correlation Coefficient

Broadcom  Walmart

Poor diversification

The 3 months correlation between Broadcom and Walmart is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Broadcom i.e., Broadcom and Walmart go up and down completely randomly.

Pair Corralation between Broadcom and Walmart

Assuming the 90 days trading horizon Broadcom is expected to under-perform the Walmart. In addition to that, Broadcom is 1.92 times more volatile than Walmart. It trades about -0.13 of its total potential returns per unit of risk. Walmart is currently generating about -0.14 per unit of volatility. If you would invest  3,578  in Walmart on December 26, 2024 and sell it today you would lose (565.00) from holding Walmart or give up 15.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Broadcom  vs.  Walmart

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. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat 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.

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat 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 Walmart

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

The idea behind Broadcom and Walmart 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.