Correlation Between Hua Xia and Advanced Micro

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

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

Diversification Opportunities for Hua Xia and Advanced Micro

0.53

Correlation Coefficient

Hua Xia  Advanced Micro

Very weak diversification

The 3 months correlation between Hua and Advanced is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hua Xia Bank and Advanced Micro Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Fabri and Hua Xia 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 Hua Xia Bank 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 Fabri has no effect on the direction of Hua Xia i.e., Hua Xia and Advanced Micro go up and down completely randomly.

Pair Corralation between Hua Xia and Advanced Micro

Assuming the 90 days trading horizon Hua Xia is expected to generate 1.72 times less return on investment than Advanced Micro. But when comparing it to its historical volatility, Hua Xia Bank is 2.33 times less risky than Advanced Micro. It trades about 0.08 of its potential returns per unit of risk. Advanced Micro Fabrication is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,945  in Advanced Micro Fabrication on September 26, 2024 and sell it today you would earn a total of  9,655  from holding Advanced Micro Fabrication or generate 97.08% return on investment over 90 days.

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

Hua Xia Bank  vs.  Advanced Micro Fabrication

Hua Xia Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Xia Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hua Xia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Advanced Micro Fabri

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Fabrication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Micro sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hua Xia and Advanced Micro

The main advantage of trading using opposite Hua Xia and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Xia 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 Hua Xia Bank and Advanced Micro Fabrication 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.