Correlation Between Advanced Micro and Carvana

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

Diversification Opportunities for Advanced Micro and Carvana

0.38

Correlation Coefficient

Advanced Micro  Carvana

Weak diversification

The 3 months correlation between Advanced and Carvana is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of Advanced Micro i.e., Advanced Micro and Carvana go up and down completely randomly.

Pair Corralation between Advanced Micro and Carvana

Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 1.09 times more return on investment than Carvana. However, Advanced Micro is 1.09 times more volatile than Carvana Co. It trades about -0.29 of its potential returns per unit of risk. Carvana Co is currently generating about -0.37 per unit of risk. If you would invest  17,863  in Advanced Micro Devices on January 24, 2024 and sell it today you would lose (2,999) from holding Advanced Micro Devices or give up 16.79% of portfolio value over 90 days.

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

Advanced Micro Devices  vs.  Carvana Co

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 unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Carvana

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Advanced Micro and Carvana

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

The idea behind Advanced Micro Devices and Carvana Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.