Correlation Between NVIDIA and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both NVIDIA 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 NVIDIA and Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Advanced Micro Devices, you can compare the effects of market volatilities on NVIDIA 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 NVIDIA with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Advanced Micro.
Diversification Opportunities for NVIDIA and Advanced Micro
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NVIDIA and Advanced is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Advanced Micro go up and down completely randomly.
Pair Corralation between NVIDIA and Advanced Micro
Given the investment horizon of 90 days NVIDIA is expected to generate 0.82 times more return on investment than Advanced Micro. However, NVIDIA is 1.22 times less risky than Advanced Micro. It trades about -0.13 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.24 per unit of risk. If you would invest 90,372 in NVIDIA on January 20, 2024 and sell it today you would lose (5,701) from holding NVIDIA or give up 6.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Advanced Micro Devices
Performance |
| Timeline |
| NVIDIA |
| Advanced Micro Devices |
NVIDIA and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Advanced Micro
The main advantage of trading using opposite NVIDIA and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel | Advanced Micro vs. Marvell Technology Group | Advanced Micro vs. Micron Technology |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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