Correlation Between Advanced Micro and Sunrun

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

Diversification Opportunities for Advanced Micro and Sunrun

0.02

Correlation Coefficient

Advanced Micro  Sunrun

Significant diversification

The 3 months correlation between Advanced and Sunrun is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Sunrun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunrun Inc 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 Sunrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunrun Inc has no effect on the direction of Advanced Micro i.e., Advanced Micro and Sunrun go up and down completely randomly.

Pair Corralation between Advanced Micro and Sunrun

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 0.63 times more return on investment than Sunrun. However, Advanced Micro Devices is 1.58 times less risky than Sunrun. It trades about -0.22 of its potential returns per unit of risk. Sunrun Inc is currently generating about -0.19 per unit of risk. If you would invest  18,334  in Advanced Micro Devices on January 30, 2024 and sell it today you would lose (2,594) from holding Advanced Micro Devices or give up 14.15% of portfolio value over 90 days.

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

Advanced Micro Devices  vs.  Sunrun Inc

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 rather sound primary indicators, Advanced Micro is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Sunrun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunrun Inc 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 basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Advanced Micro and Sunrun

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

The idea behind Advanced Micro Devices and Sunrun Inc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.