Correlation Between Advanced Micro and Valens

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

Diversification Opportunities for Advanced Micro and Valens

0.4

Correlation Coefficient

Advanced Micro  Valens

Very weak diversification

The 3 months correlation between Advanced and Valens is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Advanced Micro i.e., Advanced Micro and Valens go up and down completely randomly.

Pair Corralation between Advanced Micro and Valens

Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the Valens. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Micro Devices is 1.75 times less risky than Valens. The stock trades about -0.07 of its potential returns per unit of risk. The Valens is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Valens on September 12, 2024 and sell it today you would earn a total of  24.00  from holding Valens or generate 12.31% return on investment over 90 days.

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

Advanced Micro Devices  vs.  Valens

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 weak 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.

Valens

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Valens displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Valens

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

The idea behind Advanced Micro Devices and Valens 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.