Correlation Between Texas Instruments and Advanced Micro

Can any of the company-specific risk be diversified away by investing in both Texas Instruments and Advanced Micro 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 Texas Instruments and Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Texas Instruments Incorporated and Advanced Micro Devices, you can compare the effects of market volatilities on Texas Instruments and Advanced Micro 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 Texas Instruments with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Instruments and Advanced Micro.

Diversification Opportunities for Texas Instruments and Advanced Micro

0.47

Correlation Coefficient

Texas Instruments  Advanced Micro

Very weak diversification

The 3 months correlation between Texas and Advanced is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Texas Instruments Incorporated and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices and Texas Instruments 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 Texas Instruments Incorporated are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Texas Instruments i.e., Texas Instruments and Advanced Micro go up and down completely randomly.

Pair Corralation between Texas Instruments and Advanced Micro

Considering the 90-day investment horizon Texas Instruments Incorporated is expected to generate 0.68 times more return on investment than Advanced Micro. However, Texas Instruments Incorporated is 1.47 times less risky than Advanced Micro. It trades about 0.1 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.23 per unit of risk. If you would invest  16,791  in Texas Instruments Incorporated on January 26, 2024 and sell it today you would earn a total of  690.00  from holding Texas Instruments Incorporated or generate 4.11% return on investment over 90 days.

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

Texas Instruments Incorporated  vs.  Advanced Micro Devices

Texas Instruments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Instruments Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Texas Instruments may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 latest unfluctuating performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Texas Instruments and Advanced Micro

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

The idea behind Texas Instruments Incorporated and Advanced Micro Devices 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.