Correlation Between Broadcom and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both Broadcom and Advanced Micro 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 Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadcom and Advanced Micro Devices, you can compare the effects of market volatilities on Broadcom and Advanced Micro 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 Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadcom and Advanced Micro.
Diversification Opportunities for Broadcom and Advanced Micro
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Broadcom and Advanced is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Broadcom i.e., Broadcom and Advanced Micro go up and down completely randomly.
Pair Corralation between Broadcom and Advanced Micro
Assuming the 90 days trading horizon Broadcom is expected to generate 30.45 times more return on investment than Advanced Micro. However, Broadcom is 30.45 times more volatile than Advanced Micro Devices. It trades about 0.09 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about 0.05 per unit of risk. If you would invest 545.00 in Broadcom on September 12, 2024 and sell it today you would earn a total of 931.00 from holding Broadcom or generate 170.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Broadcom vs. Advanced Micro Devices
Performance |
| Timeline |
| Broadcom |
| Advanced Micro Devices |
Broadcom and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broadcom and Advanced Micro
The main advantage of trading using opposite Broadcom and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadcom position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.| Broadcom vs. Taiwan Semiconductor Manufacturing | Broadcom vs. Advanced Micro Devices | Broadcom vs. Micron Technology | Broadcom vs. NXP Semiconductors NV |
| Advanced Micro vs. Tyson Foods | Advanced Micro vs. Broadcom | Advanced Micro vs. United States Steel | Advanced Micro vs. TAL Education Group |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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