Correlation Between Advanced Micro and Baytex Energy

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

Diversification Opportunities for Advanced Micro and Baytex Energy

-0.53

Correlation Coefficient

Advanced Micro  Baytex Energy

Excellent diversification

The 3 months correlation between Advanced and Baytex is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp 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 Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of Advanced Micro i.e., Advanced Micro and Baytex Energy go up and down completely randomly.

Pair Corralation between Advanced Micro and Baytex Energy

Assuming the 90 days trading horizon Advanced Micro Devices is expected to generate 0.91 times more return on investment than Baytex Energy. However, Advanced Micro Devices is 1.09 times less risky than Baytex Energy. It trades about 0.23 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.05 per unit of risk. If you would invest  2,917  in Advanced Micro Devices on March 11, 2024 and sell it today you would earn a total of  301.00  from holding Advanced Micro Devices or generate 10.32% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Baytex Energy Corp

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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Baytex Energy Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baytex Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Baytex Energy may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Advanced Micro and Baytex Energy

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

The idea behind Advanced Micro Devices and Baytex Energy Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.