Correlation Between Advanced Micro and Broadcom

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

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

Diversification Opportunities for Advanced Micro and Broadcom

0.93

Correlation Coefficient

Advanced Micro  Broadcom

Almost no diversification

The 3 months correlation between Advanced and Broadcom is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and Advanced Micro 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 Advanced Micro Devices 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 Advanced Micro i.e., Advanced Micro and Broadcom go up and down completely randomly.

Pair Corralation between Advanced Micro and Broadcom

Assuming the 90 days trading horizon Advanced Micro is expected to generate 1.09 times less return on investment than Broadcom. In addition to that, Advanced Micro is 1.0 times more volatile than Broadcom. It trades about 0.24 of its total potential returns per unit of risk. Broadcom is currently generating about 0.26 per unit of volatility. If you would invest  15,264  in Broadcom on April 10, 2025 and sell it today you would earn a total of  8,406  from holding Broadcom or generate 55.07% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Broadcom

Advanced Micro Devices

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Advanced Micro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Broadcom

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Broadcom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Broadcom

The main advantage of trading using opposite Advanced Micro and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro 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 Advanced Micro Devices 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.