Correlation Between Advanced Micro and Qualcomm

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

Diversification Opportunities for Advanced Micro and Qualcomm

-0.33

Correlation Coefficient

Advanced Micro  Qualcomm

Very good diversification

The 3 months correlation between Advanced and Qualcomm is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Qualcomm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualcomm 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 Qualcomm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualcomm has no effect on the direction of Advanced Micro i.e., Advanced Micro and Qualcomm go up and down completely randomly.

Pair Corralation between Advanced Micro and Qualcomm

Assuming the 90 days trading horizon Advanced Micro is expected to generate 2.58 times less return on investment than Qualcomm. In addition to that, Advanced Micro is 1.73 times more volatile than Qualcomm. It trades about 0.16 of its total potential returns per unit of risk. Qualcomm is currently generating about 0.7 per unit of volatility. If you would invest  6,894  in Qualcomm on February 23, 2024 and sell it today you would earn a total of  1,814  from holding Qualcomm or generate 26.31% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Qualcomm

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. Despite somewhat strong basic indicators, Advanced Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qualcomm

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qualcomm are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qualcomm sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Qualcomm

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

The idea behind Advanced Micro Devices and Qualcomm 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.