Correlation Between Broadcom and Wolfspeed

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

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

Diversification Opportunities for Broadcom and Wolfspeed

-0.3

Correlation Coefficient

Broadcom  Wolfspeed

Very good diversification

The 3 months correlation between Broadcom and Wolfspeed is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Wolfspeed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfspeed 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 Wolfspeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfspeed has no effect on the direction of Broadcom i.e., Broadcom and Wolfspeed go up and down completely randomly.

Pair Corralation between Broadcom and Wolfspeed

Given the investment horizon of 90 days Broadcom is expected to generate 1.72 times less return on investment than Wolfspeed. But when comparing it to its historical volatility, Broadcom is 12.02 times less risky than Wolfspeed. It trades about 0.28 of its potential returns per unit of risk. Wolfspeed is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  334.00  in Wolfspeed on May 11, 2025 and sell it today you would lose (186.00) from holding Wolfspeed or give up 55.69% of portfolio value over 90 days.

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

Broadcom  vs.  Wolfspeed

Broadcom

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Broadcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Wolfspeed

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfspeed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Wolfspeed reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadcom and Wolfspeed

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

The idea behind Broadcom and Wolfspeed 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.