Correlation Between Analog Devices and Advanced Micro

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

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

Diversification Opportunities for Analog Devices and Advanced Micro

0.34

Correlation Coefficient

Analog Devices  Advanced Micro

Weak diversification

The 3 months correlation between Analog and Advanced is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices and Analog Devices 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 Analog Devices are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Analog Devices i.e., Analog Devices and Advanced Micro go up and down completely randomly.

Pair Corralation between Analog Devices and Advanced Micro

Considering the 90-day investment horizon Analog Devices is expected to generate 2.07 times less return on investment than Advanced Micro. But when comparing it to its historical volatility, Analog Devices is 1.78 times less risky than Advanced Micro. It trades about 0.04 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,534  in Advanced Micro Devices on January 26, 2024 and sell it today you would earn a total of  5,640  from holding Advanced Micro Devices or generate 59.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Analog Devices  vs.  Advanced Micro Devices

Analog Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Analog Devices and Advanced Micro

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

The idea behind Analog Devices and Advanced Micro Devices 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.