Correlation Between Advanced Micro and Diodes Incorporated

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

Diversification Opportunities for Advanced Micro and Diodes Incorporated

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Advanced and Diodes is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of Advanced Micro i.e., Advanced Micro and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Advanced Micro and Diodes Incorporated

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 1.23 times more return on investment than Diodes Incorporated. However, Advanced Micro is 1.23 times more volatile than Diodes Incorporated. It trades about 0.16 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.03 per unit of risk. If you would invest  10,327  in Advanced Micro Devices on December 29, 2023 and sell it today you would earn a total of  7,719  from holding Advanced Micro Devices or generate 74.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.19%
ValuesDaily Returns

Advanced Micro Devices  vs.  Diodes Incorporated

 Performance 
       Timeline  
Advanced Micro Devices 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Advanced Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.
Diodes Incorporated 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Advanced Micro and Diodes Incorporated Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advanced Micro and Diodes Incorporated

The main advantage of trading using opposite Advanced Micro and Diodes Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro position performs unexpectedly, Diodes Incorporated 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 Diodes Incorporated will offset losses from the drop in Diodes Incorporated's long position.
The idea behind Advanced Micro Devices and Diodes Incorporated 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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