Correlation Between Broadcom and Silvercorp Metals

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

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

Diversification Opportunities for Broadcom and Silvercorp Metals

0.77

Correlation Coefficient

Broadcom  Silvercorp Metals

Poor diversification

The 3 months correlation between Broadcom and Silvercorp is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals 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 Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of Broadcom i.e., Broadcom and Silvercorp Metals go up and down completely randomly.

Pair Corralation between Broadcom and Silvercorp Metals

Assuming the 90 days trading horizon Broadcom is expected to generate 0.69 times more return on investment than Silvercorp Metals. However, Broadcom is 1.46 times less risky than Silvercorp Metals. It trades about 0.05 of its potential returns per unit of risk. Silvercorp Metals is currently generating about 0.0 per unit of risk. If you would invest  15,248  in Broadcom on September 3, 2024 and sell it today you would earn a total of  981.00  from holding Broadcom or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Broadcom  vs.  Silvercorp Metals

Broadcom

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Broadcom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Silvercorp Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silvercorp Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Silvercorp Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Broadcom and Silvercorp Metals

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

The idea behind Broadcom and Silvercorp Metals 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.