Correlation Between Broadcom and Enbridge Pref

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

By analyzing existing cross correlation between Broadcom and Enbridge Pref 5, you can compare the effects of market volatilities on Broadcom and Enbridge Pref 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 Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadcom and Enbridge Pref.

Diversification Opportunities for Broadcom and Enbridge Pref

0.77

Correlation Coefficient

Broadcom  Enbridge Pref

Poor diversification

The 3 months correlation between Broadcom and Enbridge is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Enbridge Pref 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 5 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 Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 5 has no effect on the direction of Broadcom i.e., Broadcom and Enbridge Pref go up and down completely randomly.

Pair Corralation between Broadcom and Enbridge Pref

Assuming the 90 days trading horizon Broadcom is expected to generate 3.49 times more return on investment than Enbridge Pref. However, Broadcom is 3.49 times more volatile than Enbridge Pref 5. It trades about 0.26 of its potential returns per unit of risk. Enbridge Pref 5 is currently generating about 0.14 per unit of risk. If you would invest  5,444  in Broadcom on May 18, 2025 and sell it today you would earn a total of  1,749  from holding Broadcom or generate 32.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.32%
Values	Daily Returns

Broadcom  vs.  Enbridge Pref 5

Broadcom

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Broadcom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Enbridge Pref 5

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 5 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Broadcom and Enbridge Pref

The main advantage of trading using opposite Broadcom and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadcom position performs unexpectedly, Enbridge Pref 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 Enbridge Pref will offset losses from the drop in Enbridge Pref's long position.

The idea behind Broadcom and Enbridge Pref 5 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.