Correlation Between Advanced Micro and IRay Technology

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

By analyzing existing cross correlation between Advanced Micro Fabrication and iRay Technology Co, you can compare the effects of market volatilities on Advanced Micro and IRay Technology 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 IRay Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and IRay Technology.

Diversification Opportunities for Advanced Micro and IRay Technology

0.58

Correlation Coefficient

Advanced Micro  IRay Technology

Very weak diversification

The 3 months correlation between Advanced and IRay is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Fabrication and iRay Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRay Technology 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 Fabrication are associated (or correlated) with IRay Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRay Technology has no effect on the direction of Advanced Micro i.e., Advanced Micro and IRay Technology go up and down completely randomly.

Pair Corralation between Advanced Micro and IRay Technology

Assuming the 90 days trading horizon Advanced Micro Fabrication is expected to generate 1.17 times more return on investment than IRay Technology. However, Advanced Micro is 1.17 times more volatile than iRay Technology Co. It trades about 0.06 of its potential returns per unit of risk. iRay Technology Co is currently generating about -0.11 per unit of risk. If you would invest  18,283  in Advanced Micro Fabrication on September 22, 2024 and sell it today you would earn a total of  1,402  from holding Advanced Micro Fabrication or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.78%
Values	Daily Returns

Advanced Micro Fabrication  vs.  iRay Technology Co

Advanced Micro Fabri

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Fabrication are ranked lower than 14 (%) 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.

iRay Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iRay Technology Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IRay Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and IRay Technology

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

The idea behind Advanced Micro Fabrication and iRay Technology Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..