Correlation Between Broadcom and Xp

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

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

Diversification Opportunities for Broadcom and Xp

-0.76

Correlation Coefficient

Broadcom  Xp

Pay attention - limited upside

The 3 months correlation between Broadcom and Xp is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Xp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xp Inc 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 Xp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xp Inc has no effect on the direction of Broadcom i.e., Broadcom and Xp go up and down completely randomly.

Pair Corralation between Broadcom and Xp

Assuming the 90 days trading horizon Broadcom is expected to under-perform the Xp. In addition to that, Broadcom is 1.59 times more volatile than Xp Inc. It trades about -0.15 of its total potential returns per unit of risk. Xp Inc is currently generating about 0.12 per unit of volatility. If you would invest  7,331  in Xp Inc on December 29, 2024 and sell it today you would earn a total of  1,211  from holding Xp Inc or generate 16.52% return on investment over 90 days.

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

Broadcom  vs.  Xp Inc

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.

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Xp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadcom and Xp

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

The idea behind Broadcom and Xp Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.