Correlation Between NVIDIA and Advanced Micro

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

By analyzing existing cross correlation between NVIDIA and Advanced Micro Devices, you can compare the effects of market volatilities on NVIDIA and Advanced Micro 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 NVIDIA with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Advanced Micro.

Diversification Opportunities for NVIDIA and Advanced Micro

0.87

Correlation Coefficient

NVIDIA  Advanced Micro

Very poor diversification

The 3 months correlation between NVIDIA and Advanced is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices and NVIDIA 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 NVIDIA are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of NVIDIA i.e., NVIDIA and Advanced Micro go up and down completely randomly.

Pair Corralation between NVIDIA and Advanced Micro

Assuming the 90 days trading horizon NVIDIA is expected to under-perform the Advanced Micro. In addition to that, NVIDIA is 1.51 times more volatile than Advanced Micro Devices. It trades about -0.08 of its total potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.1 per unit of volatility. If you would invest  9,749  in Advanced Micro Devices on December 26, 2024 and sell it today you would lose (1,569) from holding Advanced Micro Devices or give up 16.09% of portfolio value over 90 days.

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

NVIDIA  vs.  Advanced Micro Devices

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Advanced Micro Devices

Risk-Adjusted Performance

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 primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NVIDIA and Advanced Micro

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

The idea behind NVIDIA and Advanced Micro Devices 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.