Correlation Between Advanced Micro and Arm Holdings

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

Diversification Opportunities for Advanced Micro and Arm Holdings

0.72

Correlation Coefficient

Advanced Micro  Arm Holdings

Poor diversification

The 3 months correlation between Advanced and Arm is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Advanced Micro i.e., Advanced Micro and Arm Holdings go up and down completely randomly.

Pair Corralation between Advanced Micro and Arm Holdings

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 0.89 times more return on investment than Arm Holdings. However, Advanced Micro Devices is 1.12 times less risky than Arm Holdings. It trades about 0.29 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.1 per unit of risk. If you would invest  10,170  in Advanced Micro Devices on May 8, 2025 and sell it today you would earn a total of  6,142  from holding Advanced Micro Devices or generate 60.39% 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.  Arm Holdings plc

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 22 (%) 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.

Arm Holdings plc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Arm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Arm Holdings

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

The idea behind Advanced Micro Devices and Arm Holdings plc 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.