Correlation Between Broadcom and Canopy Growth

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

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

Diversification Opportunities for Broadcom and Canopy Growth

-0.45

Correlation Coefficient

Broadcom  Canopy Growth

Very good diversification

The 3 months correlation between Broadcom and Canopy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Broadcom i.e., Broadcom and Canopy Growth go up and down completely randomly.

Pair Corralation between Broadcom and Canopy Growth

Assuming the 90 days trading horizon Broadcom is expected to generate 0.29 times more return on investment than Canopy Growth. However, Broadcom is 3.44 times less risky than Canopy Growth. It trades about 0.34 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.02 per unit of risk. If you would invest  4,522  in Broadcom on April 29, 2025 and sell it today you would earn a total of  2,300  from holding Broadcom or generate 50.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Broadcom  vs.  Canopy Growth Corp

Broadcom

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Broadcom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Canopy Growth Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Broadcom and Canopy Growth

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

The idea behind Broadcom and Canopy Growth Corp 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.