Correlation Between Under Armour and BROADCOM

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

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

Diversification Opportunities for Under Armour and BROADCOM

-0.6

Correlation Coefficient

Under Armour  BROADCOM

Excellent diversification

The 3 months correlation between Under and BROADCOM is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C 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 Under Armour 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 Under Armour C 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 Under Armour i.e., Under Armour and BROADCOM go up and down completely randomly.

Pair Corralation between Under Armour and BROADCOM

Allowing for the 90-day total investment horizon Under Armour C is expected to generate 3.15 times more return on investment than BROADCOM. However, Under Armour is 3.15 times more volatile than BROADCOM INC 144A. It trades about 0.04 of its potential returns per unit of risk. BROADCOM INC 144A is currently generating about 0.07 per unit of risk. If you would invest  665.00  in Under Armour C on September 17, 2024 and sell it today you would earn a total of  135.00  from holding Under Armour C or generate 20.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.25%
Values	Daily Returns

Under Armour C  vs.  BROADCOM INC 144A

Under Armour C

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Under Armour C are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Under Armour sustained 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 somewhat strong basic indicators, BROADCOM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Under Armour and BROADCOM

The main advantage of trading using opposite Under Armour and BROADCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour C 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.