Correlation Between Advanced Micro and Volkswagen

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

Diversification Opportunities for Advanced Micro and Volkswagen

0.65

Correlation Coefficient

Advanced Micro  Volkswagen

Poor diversification

The 3 months correlation between Advanced and Volkswagen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Advanced Micro i.e., Advanced Micro and Volkswagen go up and down completely randomly.

Pair Corralation between Advanced Micro and Volkswagen

Assuming the 90 days horizon Advanced Micro Devices is expected to under-perform the Volkswagen. In addition to that, Advanced Micro is 1.55 times more volatile than Volkswagen AG. It trades about -0.19 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.11 per unit of volatility. If you would invest  9,950  in Volkswagen AG on October 5, 2024 and sell it today you would lose (975.00) from holding Volkswagen AG or give up 9.8% of portfolio value over 90 days.

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

Advanced Micro Devices  vs.  Volkswagen AG

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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Advanced Micro and Volkswagen

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

The idea behind Advanced Micro Devices and Volkswagen AG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.