Correlation Between Applied Materials and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Advanced Micro Devices, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Advanced Micro.
Diversification Opportunities for Applied Materials and Advanced Micro
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Advanced is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Advanced Micro go up and down completely randomly.
Pair Corralation between Applied Materials and Advanced Micro
Assuming the 90 days horizon Applied Materials is expected to under-perform the Advanced Micro. In addition to that, Applied Materials is 1.01 times more volatile than Advanced Micro Devices. It trades about -0.02 of its total potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.01 per unit of volatility. If you would invest 14,458 in Advanced Micro Devices on September 3, 2024 and sell it today you would lose (1,422) from holding Advanced Micro Devices or give up 9.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Advanced Micro Devices
Performance |
| Timeline |
| Applied Materials |
| Advanced Micro Devices |
Applied Materials and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Advanced Micro
The main advantage of trading using opposite Applied Materials and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Lam Research |
| Advanced Micro vs. Information Services International Dentsu | Advanced Micro vs. MagnaChip Semiconductor Corp | Advanced Micro vs. DOCDATA | Advanced Micro vs. Nordic Semiconductor ASA |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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