Correlation Between Advanced Micro and International Business
Can any of the company-specific risk be diversified away by investing in both Advanced Micro and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Advanced Micro and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and International Business.
Diversification Opportunities for Advanced Micro and International Business
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and International is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Advanced Micro i.e., Advanced Micro and International Business go up and down completely randomly.
Pair Corralation between Advanced Micro and International Business
Assuming the 90 days horizon Advanced Micro is expected to generate 2.09 times less return on investment than International Business. In addition to that, Advanced Micro is 2.03 times more volatile than International Business Machines. It trades about 0.03 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.12 per unit of volatility. If you would invest 11,690 in International Business Machines on August 31, 2024 and sell it today you would earn a total of 9,810 from holding International Business Machines or generate 83.92% 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. International Business Machine
Performance |
| Timeline |
| Advanced Micro Devices |
| International Business |
Advanced Micro and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Micro and International Business
The main advantage of trading using opposite Advanced Micro and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Advanced Micro vs. NVIDIA | Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel |
| International Business vs. FUJITSU LTD ADR | International Business vs. Superior Plus Corp | International Business vs. NMI Holdings | International Business vs. Origin Agritech |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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