Correlation Between Broadcom and Hampton Financial

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

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

Diversification Opportunities for Broadcom and Hampton Financial

0.61

Correlation Coefficient

Broadcom  Hampton Financial

Poor diversification

The 3 months correlation between Broadcom and Hampton is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Hampton Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampton Financial Corp 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 Hampton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampton Financial Corp has no effect on the direction of Broadcom i.e., Broadcom and Hampton Financial go up and down completely randomly.

Pair Corralation between Broadcom and Hampton Financial

Assuming the 90 days trading horizon Broadcom is expected to generate 2.09 times more return on investment than Hampton Financial. However, Broadcom is 2.09 times more volatile than Hampton Financial Corp. It trades about 0.13 of its potential returns per unit of risk. Hampton Financial Corp is currently generating about 0.03 per unit of risk. If you would invest  4,186  in Broadcom on September 25, 2024 and sell it today you would earn a total of  1,371  from holding Broadcom or generate 32.75% return on investment over 90 days.

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

Broadcom  vs.  Hampton Financial Corp

Broadcom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Broadcom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hampton Financial Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hampton Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hampton Financial 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 Hampton Financial

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

The idea behind Broadcom and Hampton Financial Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.