Correlation Between MaxLinear and Advanced Micro

Can any of the company-specific risk be diversified away by investing in both MaxLinear 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 MaxLinear and Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MaxLinear and Advanced Micro Devices, you can compare the effects of market volatilities on MaxLinear 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 MaxLinear with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of MaxLinear and Advanced Micro.

Diversification Opportunities for MaxLinear and Advanced Micro

-0.15

Correlation Coefficient

MaxLinear  Advanced Micro

Good diversification

The 3 months correlation between MaxLinear and Advanced is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding MaxLinear 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 MaxLinear 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 MaxLinear 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 MaxLinear i.e., MaxLinear and Advanced Micro go up and down completely randomly.

Pair Corralation between MaxLinear and Advanced Micro

Considering the 90-day investment horizon MaxLinear is expected to generate 1.06 times more return on investment than Advanced Micro. However, MaxLinear is 1.06 times more volatile than Advanced Micro Devices. It trades about -0.01 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.06 per unit of risk. If you would invest  2,214  in MaxLinear on January 26, 2024 and sell it today you would lose (121.00) from holding MaxLinear or give up 5.47% of portfolio value over 90 days.

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

MaxLinear  vs.  Advanced Micro Devices

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 quite persistent basic indicators, MaxLinear is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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 latest unfluctuating performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with MaxLinear and Advanced Micro

The main advantage of trading using opposite MaxLinear and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MaxLinear 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.

The idea behind MaxLinear and Advanced Micro Devices 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.