Correlation Between Advanced Micro and Power Integrations

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

Diversification Opportunities for Advanced Micro and Power Integrations

-0.63

Correlation Coefficient

Advanced Micro  Power Integrations

Excellent diversification

The 3 months correlation between Advanced and Power is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of Advanced Micro i.e., Advanced Micro and Power Integrations go up and down completely randomly.

Pair Corralation between Advanced Micro and Power Integrations

Assuming the 90 days trading horizon Advanced Micro Devices is expected to under-perform the Power Integrations. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Micro Devices is 1.16 times less risky than Power Integrations. The stock trades about -0.09 of its potential returns per unit of risk. The Power Integrations is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,780  in Power Integrations on October 6, 2024 and sell it today you would earn a total of  220.00  from holding Power Integrations or generate 3.81% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Power Integrations

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 fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Power Integrations

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Integrations are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Power Integrations may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Advanced Micro and Power Integrations

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

The idea behind Advanced Micro Devices and Power Integrations 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.