Correlation Between Litigation Capital and Broadridge Financial

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

By analyzing existing cross correlation between Litigation Capital Management and Broadridge Financial Solutions, you can compare the effects of market volatilities on Litigation Capital and Broadridge Financial 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 Litigation Capital with a short position of Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and Broadridge Financial.

Diversification Opportunities for Litigation Capital and Broadridge Financial

-0.55

Correlation Coefficient

Litigation Capital  Broadridge Financial

Excellent diversification

The 3 months correlation between Litigation and Broadridge is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and Litigation Capital 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 Litigation Capital Management are associated (or correlated) with Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Litigation Capital i.e., Litigation Capital and Broadridge Financial go up and down completely randomly.

Pair Corralation between Litigation Capital and Broadridge Financial

Assuming the 90 days trading horizon Litigation Capital Management is expected to under-perform the Broadridge Financial. In addition to that, Litigation Capital is 2.91 times more volatile than Broadridge Financial Solutions. It trades about -0.35 of its total potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.1 per unit of volatility. If you would invest  23,095  in Broadridge Financial Solutions on December 3, 2024 and sell it today you would earn a total of  1,366  from holding Broadridge Financial Solutions or generate 5.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Litigation Capital Management  vs.  Broadridge Financial Solutions

Litigation Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Litigation Capital Management 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Broadridge Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Broadridge Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Litigation Capital and Broadridge Financial

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

The idea behind Litigation Capital Management and Broadridge Financial Solutions 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.