Correlation Between Advanced Micro and NETGEAR

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

Diversification Opportunities for Advanced Micro and NETGEAR

0.58

Correlation Coefficient

Advanced Micro  NETGEAR

Very weak diversification

The 3 months correlation between Advanced and NETGEAR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Advanced Micro i.e., Advanced Micro and NETGEAR go up and down completely randomly.

Pair Corralation between Advanced Micro and NETGEAR

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 0.81 times more return on investment than NETGEAR. However, Advanced Micro Devices is 1.23 times less risky than NETGEAR. It trades about 0.39 of its potential returns per unit of risk. NETGEAR is currently generating about 0.14 per unit of risk. If you would invest  8,556  in Advanced Micro Devices on April 20, 2025 and sell it today you would earn a total of  7,143  from holding Advanced Micro Devices or generate 83.49% return on investment over 90 days.

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

Advanced Micro Devices  vs.  NETGEAR

Advanced Micro Devices

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Advanced Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and NETGEAR

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

The idea behind Advanced Micro Devices and NETGEAR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..