Correlation Between Advanced Micro and Diodes Incorporated

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

Diversification Opportunities for Advanced Micro and Diodes Incorporated

0.11

Correlation Coefficient

Advanced Micro  Diodes Incorporated

Average diversification

The 3 months correlation between Advanced and Diodes is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of Advanced Micro i.e., Advanced Micro and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Advanced Micro and Diodes Incorporated

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 1.28 times more return on investment than Diodes Incorporated. However, Advanced Micro is 1.28 times more volatile than Diodes Incorporated. It trades about 0.11 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.02 per unit of risk. If you would invest  9,596  in Advanced Micro Devices on January 24, 2024 and sell it today you would earn a total of  5,268  from holding Advanced Micro Devices or generate 54.9% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Diodes Incorporated

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 unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Diodes Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Advanced Micro and Diodes Incorporated

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

The idea behind Advanced Micro Devices and Diodes Incorporated 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.