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

-0.34

Correlation Coefficient

Texas Instruments  Advanced Micro

Very good diversification

The 3 months correlation between Texas and Advanced is -0.34. 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

Assuming the 90 days trading horizon Texas Instruments Incorporated is expected to generate 0.59 times more return on investment than Advanced Micro. However, Texas Instruments Incorporated is 1.69 times less risky than Advanced Micro. It trades about 0.08 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about 0.02 per unit of risk. 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

Texas Instruments Incorporated  vs.  Advanced Micro Devices

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.

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.

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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.