Correlation Between Advanced Micro and Analog Devices

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Can any of the company-specific risk be diversified away by investing in both Advanced Micro and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on Advanced Micro and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and Analog Devices.

Diversification Opportunities for Advanced Micro and Analog Devices

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Advanced and Analog is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Advanced Micro i.e., Advanced Micro and Analog Devices go up and down completely randomly.

Pair Corralation between Advanced Micro and Analog Devices

Considering the 90-day investment horizon Advanced Micro is expected to generate 1.55 times less return on investment than Analog Devices. In addition to that, Advanced Micro is 1.97 times more volatile than Analog Devices. It trades about 0.03 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.08 per unit of volatility. If you would invest  18,818  in Analog Devices on December 29, 2023 and sell it today you would earn a total of  515.00  from holding Analog Devices or generate 2.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Advanced Micro Devices  vs.  Analog Devices

 Performance 
       Timeline  
Advanced Micro Devices 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Advanced Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.
Analog Devices 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Advanced Micro and Analog Devices Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advanced Micro and Analog Devices

The main advantage of trading using opposite Advanced Micro and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.
The idea behind Advanced Micro Devices and Analog 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.
Check out your portfolio center.
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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