Correlation Between Broadcom and Advent Technologies

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

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

Diversification Opportunities for Broadcom and Advent Technologies

-0.56

Correlation Coefficient

Broadcom  Advent Technologies

Excellent diversification

The 3 months correlation between Broadcom and Advent is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Advent Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Technologies 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 Advent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Technologies has no effect on the direction of Broadcom i.e., Broadcom and Advent Technologies go up and down completely randomly.

Pair Corralation between Broadcom and Advent Technologies

Given the investment horizon of 90 days Broadcom is expected to generate 39.72 times less return on investment than Advent Technologies. But when comparing it to its historical volatility, Broadcom is 3.55 times less risky than Advent Technologies. It trades about 0.01 of its potential returns per unit of risk. Advent Technologies Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.82  in Advent Technologies Holdings on July 29, 2024 and sell it today you would earn a total of  0.16  from holding Advent Technologies Holdings or generate 19.51% 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.  Advent Technologies Holdings

Broadcom

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Broadcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Advent Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advent Technologies Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advent Technologies 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 Advent Technologies

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

The idea behind Broadcom and Advent Technologies Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.