Correlation Between Advanced Micro and Veeco Instruments

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

Diversification Opportunities for Advanced Micro and Veeco Instruments

0.85

Correlation Coefficient

Advanced Micro  Veeco Instruments

Very poor diversification

The 3 months correlation between Advanced and Veeco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Veeco Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeco 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 Veeco Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeco Instruments has no effect on the direction of Advanced Micro i.e., Advanced Micro and Veeco Instruments go up and down completely randomly.

Pair Corralation between Advanced Micro and Veeco Instruments

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the Veeco Instruments. In addition to that, Advanced Micro is 1.13 times more volatile than Veeco Instruments. It trades about -0.07 of its total potential returns per unit of risk. Veeco Instruments is currently generating about -0.03 per unit of volatility. If you would invest  3,006  in Veeco Instruments on September 12, 2024 and sell it today you would lose (166.00) from holding Veeco Instruments or give up 5.52% of portfolio value over 90 days.

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

Advanced Micro Devices  vs.  Veeco Instruments

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.

Veeco Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veeco Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Veeco Instruments is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Advanced Micro and Veeco Instruments

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

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