Correlation Between Advanced Micro and Alcoa Corp

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

Diversification Opportunities for Advanced Micro and Alcoa Corp

-0.13

Correlation Coefficient

Advanced Micro  Alcoa Corp

Good diversification

The 3 months correlation between Advanced and Alcoa is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Advanced Micro i.e., Advanced Micro and Alcoa Corp go up and down completely randomly.

Pair Corralation between Advanced Micro and Alcoa Corp

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Micro Devices is 1.08 times less risky than Alcoa Corp. The stock trades about -0.32 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,103  in Alcoa Corp on January 17, 2024 and sell it today you would earn a total of  554.00  from holding Alcoa Corp or generate 17.85% 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.  Alcoa Corp

Advanced Micro Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Advanced Micro is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Alcoa Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Alcoa Corp

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

The idea behind Advanced Micro Devices and Alcoa 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..