Correlation Between Broadcom and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both Broadcom and Highlight Communications 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 Broadcom and Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadcom and Highlight Communications AG, you can compare the effects of market volatilities on Broadcom and Highlight Communications 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 Broadcom with a short position of Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadcom and Highlight Communications.
Diversification Opportunities for Broadcom and Highlight Communications
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Broadcom and Highlight is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and Broadcom 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 Broadcom are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of Broadcom i.e., Broadcom and Highlight Communications go up and down completely randomly.
Pair Corralation between Broadcom and Highlight Communications
Assuming the 90 days trading horizon Broadcom is expected to generate 0.57 times more return on investment than Highlight Communications. However, Broadcom is 1.76 times less risky than Highlight Communications. It trades about -0.45 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.27 per unit of risk. If you would invest 22,750 in Broadcom on December 10, 2024 and sell it today you would lose (5,108) from holding Broadcom or give up 22.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Broadcom vs. Highlight Communications AG
Performance |
| Timeline |
| Broadcom |
| Highlight Communications |
Broadcom and Highlight Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broadcom and Highlight Communications
The main advantage of trading using opposite Broadcom and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadcom position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.| Broadcom vs. AIR PRODCHEMICALS | Broadcom vs. LINMON MEDIA LTD | Broadcom vs. ZINC MEDIA GR | Broadcom vs. Media and Games |
| Highlight Communications vs. Wizz Air Holdings | Highlight Communications vs. Japan Asia Investment | Highlight Communications vs. QLEANAIR AB SK 50 | Highlight Communications vs. JLF INVESTMENT |
Check out your portfolio center.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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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