Correlation Between Broadcom and Ambarella

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

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

Diversification Opportunities for Broadcom and Ambarella

0.79

Correlation Coefficient

Broadcom  Ambarella

Poor diversification

The 3 months correlation between Broadcom and Ambarella is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Ambarella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambarella 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 Ambarella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambarella has no effect on the direction of Broadcom i.e., Broadcom and Ambarella go up and down completely randomly.

Pair Corralation between Broadcom and Ambarella

Given the investment horizon of 90 days Broadcom is expected to generate 0.49 times more return on investment than Ambarella. However, Broadcom is 2.03 times less risky than Ambarella. It trades about 0.35 of its potential returns per unit of risk. Ambarella is currently generating about 0.17 per unit of risk. If you would invest  19,072  in Broadcom on April 29, 2025 and sell it today you would earn a total of  9,946  from holding Broadcom or generate 52.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Broadcom  vs.  Ambarella

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 very conflicting technical and fundamental indicators, Broadcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Ambarella

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Ambarella sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadcom and Ambarella

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

The idea behind Broadcom and Ambarella 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.