Correlation Between Advanced Micro and Small Cap
Can any of the company-specific risk be diversified away by investing in both Advanced Micro and Small Cap 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 Small Cap 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 Small Cap Premium, you can compare the effects of market volatilities on Advanced Micro and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and Small Cap.
Diversification Opportunities for Advanced Micro and Small Cap
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advanced and Small is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Advanced Micro i.e., Advanced Micro and Small Cap go up and down completely randomly.
Pair Corralation between Advanced Micro and Small Cap
Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 6.7 times more return on investment than Small Cap. However, Advanced Micro is 6.7 times more volatile than Small Cap Premium. It trades about 0.02 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.1 per unit of risk. If you would invest 9,548 in Advanced Micro Devices on November 27, 2024 and sell it today you would earn a total of 1,263 from holding Advanced Micro Devices or generate 13.23% 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. Small Cap Premium
Performance |
| Timeline |
| Advanced Micro Devices |
| Small Cap Premium |
Advanced Micro and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Micro and Small Cap
The main advantage of trading using opposite Advanced Micro and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel | Advanced Micro vs. Marvell Technology Group | Advanced Micro vs. Micron Technology |
| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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