Correlation Between Advanced Micro and Diodes Incorporated

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

Diversification Opportunities for Advanced Micro and Diodes Incorporated

0.21

Correlation Coefficient

Advanced Micro  Diodes Incorporated

Modest diversification

The 3 months correlation between Advanced and Diodes is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of Advanced Micro i.e., Advanced Micro and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Advanced Micro and Diodes Incorporated

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the Diodes Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Micro Devices is 1.05 times less risky than Diodes Incorporated. The stock trades about -0.05 of its potential returns per unit of risk. The Diodes Incorporated is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,069  in Diodes Incorporated on September 25, 2024 and sell it today you would lose (913.00) from holding Diodes Incorporated or give up 12.92% of portfolio value over 90 days.

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

Advanced Micro Devices  vs.  Diodes Incorporated

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 unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Diodes Incorporated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Diodes Incorporated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Advanced Micro and Diodes Incorporated

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

The idea behind Advanced Micro Devices and Diodes Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.