Correlation Between Gaztransport Technigaz and Broadcom

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

By analyzing existing cross correlation between Gaztransport Technigaz SA and Broadcom, you can compare the effects of market volatilities on Gaztransport Technigaz and Broadcom 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 Gaztransport Technigaz with a short position of Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport Technigaz and Broadcom.

Diversification Opportunities for Gaztransport Technigaz and Broadcom

0.41

Correlation Coefficient

Gaztransport Technigaz  Broadcom

Very weak diversification

The 3 months correlation between Gaztransport and Broadcom is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SA and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and Gaztransport Technigaz 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 Gaztransport Technigaz SA are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of Gaztransport Technigaz i.e., Gaztransport Technigaz and Broadcom go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and Broadcom

Assuming the 90 days horizon Gaztransport Technigaz SA is expected to under-perform the Broadcom. But the stock apears to be less risky and, when comparing its historical volatility, Gaztransport Technigaz SA is 1.31 times less risky than Broadcom. The stock trades about -0.11 of its potential returns per unit of risk. The Broadcom is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  114,220  in Broadcom on February 21, 2024 and sell it today you would earn a total of  15,100  from holding Broadcom or generate 13.22% return on investment over 90 days.

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

Gaztransport Technigaz SA  vs.  Broadcom

Gaztransport Technigaz

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gaztransport Technigaz may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Broadcom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gaztransport Technigaz and Broadcom

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

The idea behind Gaztransport Technigaz SA and Broadcom 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 Stocks Directory module to find actively traded stocks across global markets.