Correlation Between VOLKSWAGEN and Broadcom

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

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

Diversification Opportunities for VOLKSWAGEN and Broadcom

-0.1

Correlation Coefficient

VOLKSWAGEN  Broadcom

Good diversification

The 3 months correlation between VOLKSWAGEN and Broadcom is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and VOLKSWAGEN 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 VOLKSWAGEN AG VZ 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 VOLKSWAGEN i.e., VOLKSWAGEN and Broadcom go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and Broadcom

Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to under-perform the Broadcom. But the stock apears to be less risky and, when comparing its historical volatility, VOLKSWAGEN AG VZ is 1.8 times less risky than Broadcom. The stock trades about -0.07 of its potential returns per unit of risk. The Broadcom is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,612  in Broadcom on September 14, 2024 and sell it today you would earn a total of  2,772  from holding Broadcom or generate 18.97% return on investment over 90 days.

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

VOLKSWAGEN AG VZ  vs.  Broadcom

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOLKSWAGEN AG VZ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VOLKSWAGEN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Broadcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VOLKSWAGEN and Broadcom

The main advantage of trading using opposite VOLKSWAGEN and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VOLKSWAGEN 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 VOLKSWAGEN AG VZ 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.