Correlation Between Advanced Micro and Teradyne

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

Diversification Opportunities for Advanced Micro and Teradyne

0.59

Correlation Coefficient

Advanced Micro  Teradyne

Very weak diversification

The 3 months correlation between Advanced and Teradyne is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Advanced Micro i.e., Advanced Micro and Teradyne go up and down completely randomly.

Pair Corralation between Advanced Micro and Teradyne

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the Teradyne. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Micro Devices is 1.03 times less risky than Teradyne. The stock trades about -0.24 of its potential returns per unit of risk. The Teradyne is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  10,403  in Teradyne on September 19, 2024 and sell it today you would earn a total of  2,398  from holding Teradyne or generate 23.05% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Teradyne

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 weak 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.

Teradyne

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Teradyne is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Advanced Micro and Teradyne

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

The idea behind Advanced Micro Devices and Teradyne 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.