Correlation Between Advanced Micro and Texas Instruments

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

Diversification Opportunities for Advanced Micro and Texas Instruments

-0.34

Correlation Coefficient

Advanced Micro  Texas Instruments

Very good diversification

The 3 months correlation between Advanced and Texas is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Texas Instruments Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Instruments 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 Texas Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Instruments has no effect on the direction of Advanced Micro i.e., Advanced Micro and Texas Instruments go up and down completely randomly.

Pair Corralation between Advanced Micro and Texas Instruments

Assuming the 90 days trading horizon Advanced Micro is expected to generate 2.0 times less return on investment than Texas Instruments. In addition to that, Advanced Micro is 1.69 times more volatile than Texas Instruments Incorporated. It trades about 0.02 of its total potential returns per unit of risk. Texas Instruments Incorporated is currently generating about 0.08 per unit of volatility. If you would invest  5,414  in Texas Instruments Incorporated on September 24, 2024 and sell it today you would earn a total of  2,146  from holding Texas Instruments Incorporated or generate 39.64% 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.  Texas Instruments Incorporated

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. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Texas Instruments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Instruments Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Texas Instruments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Advanced Micro and Texas Instruments

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

The idea behind Advanced Micro Devices and Texas Instruments Incorporated 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.