Correlation Between National Vision and Broadcom

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

By analyzing existing cross correlation between National Vision Holdings and Broadcom, you can compare the effects of market volatilities on National Vision and Broadcom 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 National Vision with a short position of Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Vision and Broadcom.

Diversification Opportunities for National Vision and Broadcom

-0.54

Correlation Coefficient

National Vision  Broadcom

Excellent diversification

The 3 months correlation between National and Broadcom is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and National Vision 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 National Vision Holdings are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of National Vision i.e., National Vision and Broadcom go up and down completely randomly.

Pair Corralation between National Vision and Broadcom

Considering the 90-day investment horizon National Vision Holdings is expected to generate 0.79 times more return on investment than Broadcom. However, National Vision Holdings is 1.27 times less risky than Broadcom. It trades about 0.1 of its potential returns per unit of risk. Broadcom is currently generating about -0.07 per unit of risk. If you would invest  1,097  in National Vision Holdings on December 21, 2024 and sell it today you would earn a total of  185.00  from holding National Vision Holdings or generate 16.86% return on investment over 90 days.

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

National Vision Holdings  vs.  Broadcom

National Vision Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with National Vision and Broadcom

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

The idea behind National Vision Holdings and Broadcom 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.