Correlation Between Industrial and Advanced Micro

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

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

Diversification Opportunities for Industrial and Advanced Micro

-0.07

Correlation Coefficient

Industrial  Advanced Micro

Good diversification

The 3 months correlation between Industrial and Advanced is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial 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 Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Advanced Micro go up and down completely randomly.

Pair Corralation between Industrial and Advanced Micro

Assuming the 90 days trading horizon Industrial is expected to generate 1.3 times less return on investment than Advanced Micro. But when comparing it to its historical volatility, Industrial and Commercial is 2.65 times less risky than Advanced Micro. It trades about 0.1 of its potential returns per unit of risk. Advanced Micro Fabrication is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,980  in Advanced Micro Fabrication on October 5, 2024 and sell it today you would earn a total of  7,110  from holding Advanced Micro Fabrication or generate 64.75% return on investment over 90 days.

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

Industrial and Commercial  vs.  Advanced Micro Fabrication

Industrial and Commercial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Advanced Micro Fabri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Fabrication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Advanced Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial and Advanced Micro

The main advantage of trading using opposite Industrial and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.