Correlation Between Broadcom and Dolby Laboratories

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

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

Diversification Opportunities for Broadcom and Dolby Laboratories

-0.66

Correlation Coefficient

Broadcom  Dolby Laboratories

Excellent diversification

The 3 months correlation between Broadcom and Dolby is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories 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 Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of Broadcom i.e., Broadcom and Dolby Laboratories go up and down completely randomly.

Pair Corralation between Broadcom and Dolby Laboratories

Given the investment horizon of 90 days Broadcom is expected to generate 2.07 times more return on investment than Dolby Laboratories. However, Broadcom is 2.07 times more volatile than Dolby Laboratories. It trades about 0.18 of its potential returns per unit of risk. Dolby Laboratories is currently generating about -0.08 per unit of risk. If you would invest  28,815  in Broadcom on August 1, 2025 and sell it today you would earn a total of  9,783  from holding Broadcom or generate 33.95% return on investment over 90 days.

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

Broadcom  vs.  Dolby Laboratories

Broadcom

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Broadcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Dolby Laboratories

Risk-Adjusted Performance

Weakest

Over the last 90 days Dolby Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Broadcom and Dolby Laboratories

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

The idea behind Broadcom and Dolby Laboratories 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.