Correlation Between Advanced Micro and Upbound
Can any of the company-specific risk be diversified away by investing in both Advanced Micro and Upbound 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 Upbound 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 Upbound Group, you can compare the effects of market volatilities on Advanced Micro and Upbound 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 Upbound. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and Upbound.
Diversification Opportunities for Advanced Micro and Upbound
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advanced and Upbound is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Upbound Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upbound Group 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 Upbound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upbound Group has no effect on the direction of Advanced Micro i.e., Advanced Micro and Upbound go up and down completely randomly.
Pair Corralation between Advanced Micro and Upbound
Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 1.4 times more return on investment than Upbound. However, Advanced Micro is 1.4 times more volatile than Upbound Group. It trades about 0.1 of its potential returns per unit of risk. Upbound Group is currently generating about 0.07 per unit of risk. If you would invest 8,757 in Advanced Micro Devices on January 18, 2024 and sell it today you would earn a total of 7,589 from holding Advanced Micro Devices or generate 86.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Advanced Micro Devices vs. Upbound Group
Performance |
Timeline |
Advanced Micro Devices |
Upbound Group |
Advanced Micro and Upbound Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advanced Micro and Upbound
The main advantage of trading using opposite Advanced Micro and Upbound positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro position performs unexpectedly, Upbound 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 Upbound will offset losses from the drop in Upbound's long position.The idea behind Advanced Micro Devices and Upbound Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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