Correlation Between Advanced Micro and ASE Industrial

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

Diversification Opportunities for Advanced Micro and ASE Industrial

0.26

Correlation Coefficient

Advanced Micro  ASE Industrial

Modest diversification

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

Pair Corralation between Advanced Micro and ASE Industrial

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the ASE Industrial. In addition to that, Advanced Micro is 1.9 times more volatile than ASE Industrial Holding. It trades about -0.23 of its total potential returns per unit of risk. ASE Industrial Holding is currently generating about -0.16 per unit of volatility. If you would invest  1,098  in ASE Industrial Holding on January 26, 2024 and sell it today you would lose (61.00) from holding ASE Industrial Holding or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Advanced Micro Devices  vs.  ASE Industrial Holding

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.

ASE Industrial Holding

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Advanced Micro and ASE Industrial

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

The idea behind Advanced Micro Devices and ASE Industrial Holding 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 Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.