Correlation Between Advanced Micro and Allegro Microsystems

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

Diversification Opportunities for Advanced Micro and Allegro Microsystems

0.64

Correlation Coefficient

Advanced Micro  Allegro Microsystems

Poor diversification

The 3 months correlation between Advanced and Allegro is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Allegro Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegro Microsystems 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 Allegro Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegro Microsystems has no effect on the direction of Advanced Micro i.e., Advanced Micro and Allegro Microsystems go up and down completely randomly.

Pair Corralation between Advanced Micro and Allegro Microsystems

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 1.03 times more return on investment than Allegro Microsystems. However, Advanced Micro is 1.03 times more volatile than Allegro Microsystems. It trades about 0.26 of its potential returns per unit of risk. Allegro Microsystems is currently generating about 0.09 per unit of risk. If you would invest  11,717  in Advanced Micro Devices on May 16, 2025 and sell it today you would earn a total of  6,376  from holding Advanced Micro Devices or generate 54.42% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Allegro Microsystems

Advanced Micro Devices

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Advanced Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.

Allegro Microsystems

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Allegro Microsystems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Allegro Microsystems displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Allegro Microsystems

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

The idea behind Advanced Micro Devices and Allegro Microsystems 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.