Correlation Between CM Hospitalar and Broadcom

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

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

Diversification Opportunities for CM Hospitalar and Broadcom

0.1

Correlation Coefficient

CM Hospitalar  Broadcom

Average diversification

The 3 months correlation between VVEO3 and Broadcom is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CM Hospitalar SA and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and CM Hospitalar 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 CM Hospitalar SA 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 CM Hospitalar i.e., CM Hospitalar and Broadcom go up and down completely randomly.

Pair Corralation between CM Hospitalar and Broadcom

Assuming the 90 days trading horizon CM Hospitalar SA is expected to generate 1.84 times more return on investment than Broadcom. However, CM Hospitalar is 1.84 times more volatile than Broadcom. It trades about 0.05 of its potential returns per unit of risk. Broadcom is currently generating about 0.04 per unit of risk. If you would invest  190.00  in CM Hospitalar SA on August 30, 2024 and sell it today you would earn a total of  14.00  from holding CM Hospitalar SA or generate 7.37% return on investment over 90 days.

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

CM Hospitalar SA  vs.  Broadcom

CM Hospitalar SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CM Hospitalar SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CM Hospitalar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Broadcom

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Broadcom may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CM Hospitalar and Broadcom

The main advantage of trading using opposite CM Hospitalar and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CM Hospitalar 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 CM Hospitalar SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.