Correlation Between Trupanion and BROADCOM

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

By analyzing existing cross correlation between Trupanion and BROADCOM INC 144A, you can compare the effects of market volatilities on Trupanion 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 Trupanion with a short position of BROADCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trupanion and BROADCOM.

Diversification Opportunities for Trupanion and BROADCOM

-0.61

Correlation Coefficient

Trupanion  BROADCOM

Excellent diversification

The 3 months correlation between Trupanion and BROADCOM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Trupanion and BROADCOM INC 144A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADCOM INC 144A and Trupanion 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 Trupanion 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 INC 144A has no effect on the direction of Trupanion i.e., Trupanion and BROADCOM go up and down completely randomly.

Pair Corralation between Trupanion and BROADCOM

Given the investment horizon of 90 days Trupanion is expected to generate 2.86 times more return on investment than BROADCOM. However, Trupanion is 2.86 times more volatile than BROADCOM INC 144A. It trades about 0.09 of its potential returns per unit of risk. BROADCOM INC 144A is currently generating about -0.2 per unit of risk. If you would invest  4,655  in Trupanion on September 14, 2024 and sell it today you would earn a total of  686.00  from holding Trupanion or generate 14.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Trupanion  vs.  BROADCOM INC 144A

Trupanion

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

BROADCOM INC 144A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BROADCOM INC 144A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for BROADCOM INC 144A investors.

Pair Trading with Trupanion and BROADCOM

The main advantage of trading using opposite Trupanion and BROADCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trupanion 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 Trupanion and BROADCOM INC 144A 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.