Correlation Between Broadcom and Akamai Technologies

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

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

Diversification Opportunities for Broadcom and Akamai Technologies

-0.31

Correlation Coefficient

Broadcom  Akamai Technologies

Very good diversification

The 3 months correlation between Broadcom and Akamai is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies 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 Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of Broadcom i.e., Broadcom and Akamai Technologies go up and down completely randomly.

Pair Corralation between Broadcom and Akamai Technologies

Assuming the 90 days trading horizon Broadcom is expected to generate 1.54 times more return on investment than Akamai Technologies. However, Broadcom is 1.54 times more volatile than Akamai Technologies. It trades about 0.32 of its potential returns per unit of risk. Akamai Technologies is currently generating about 0.02 per unit of risk. If you would invest  15,713  in Broadcom on April 23, 2025 and sell it today you would earn a total of  8,927  from holding Broadcom or generate 56.81% return on investment over 90 days.

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

Broadcom  vs.  Akamai Technologies

Broadcom

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Akamai Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akamai Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Akamai Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Broadcom and Akamai Technologies

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

The idea behind Broadcom and Akamai Technologies 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.