Correlation Between Fresenius Medical and Broadcom

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

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

Diversification Opportunities for Fresenius Medical and Broadcom

-0.38

Correlation Coefficient

Fresenius Medical  Broadcom

Very good diversification

The 3 months correlation between Fresenius and Broadcom is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and Fresenius Medical 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 Fresenius Medical Care 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 Fresenius Medical i.e., Fresenius Medical and Broadcom go up and down completely randomly.

Pair Corralation between Fresenius Medical and Broadcom

If you would invest  1,543  in Broadcom on October 8, 2024 and sell it today you would earn a total of  521.00  from holding Broadcom or generate 33.77% return on investment over 90 days.

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

Fresenius Medical Care  vs.  Broadcom

Fresenius Medical Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fresenius Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Fresenius Medical and Broadcom

The main advantage of trading using opposite Fresenius Medical and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical 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 Fresenius Medical Care 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.