Correlation Between E L and Broadcom
Can any of the company-specific risk be diversified away by investing in both E L 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 E L and Broadcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E L Financial Corp and Broadcom, you can compare the effects of market volatilities on E L 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 E L with a short position of Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Broadcom.
Diversification Opportunities for E L and Broadcom
Very good diversification
The 3 months correlation between ELF and Broadcom is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and E L 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 E L Financial Corp 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 E L i.e., E L and Broadcom go up and down completely randomly.
Pair Corralation between E L and Broadcom
Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.81 times more return on investment than Broadcom. However, E L Financial Corp is 1.24 times less risky than Broadcom. It trades about 0.09 of its potential returns per unit of risk. Broadcom is currently generating about -0.03 per unit of risk. If you would invest 132,500 in E L Financial Corp on November 3, 2024 and sell it today you would earn a total of 7,575 from holding E L Financial Corp or generate 5.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E L Financial Corp vs. Broadcom
Performance |
| Timeline |
| E L Financial |
| Broadcom |
E L and Broadcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Broadcom
The main advantage of trading using opposite E L and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L 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.| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
| Broadcom vs. Giga Metals Corp | Broadcom vs. Black Mammoth Metals | Broadcom vs. Network Media Group | Broadcom vs. VIP Entertainment Technologies |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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