Correlation Between Advanced Micro and MaxLinear

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

Diversification Opportunities for Advanced Micro and MaxLinear

-0.15

Correlation Coefficient

Advanced Micro  MaxLinear

Good diversification

The 3 months correlation between Advanced and MaxLinear is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear 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 MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of Advanced Micro i.e., Advanced Micro and MaxLinear go up and down completely randomly.

Pair Corralation between Advanced Micro and MaxLinear

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 0.87 times more return on investment than MaxLinear. However, Advanced Micro Devices is 1.15 times less risky than MaxLinear. It trades about 0.1 of its potential returns per unit of risk. MaxLinear is currently generating about 0.01 per unit of risk. If you would invest  10,261  in Advanced Micro Devices on January 24, 2024 and sell it today you would earn a total of  4,966  from holding Advanced Micro Devices or generate 48.4% return on investment over 90 days.

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

Advanced Micro Devices  vs.  MaxLinear

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MaxLinear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MaxLinear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Advanced Micro and MaxLinear

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

The idea behind Advanced Micro Devices and MaxLinear 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.