37.08 -0.52 (-1.41%) Buy

Don't consider investing in AMBA now, it is risky at the moment

13 min read

AMBARELLA INC delivered massive losses on Monday. It returned -1.41% to close at 37.08. On a day when the overall market breadth was 34%, it closed higher than 14% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing AMBA]

AMBA showed a up trend over the last 3 months. During this period AMBA gained +1.64% and saw a maximum drawdown of -17.68%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in AMBA till volatility reduces and a clear trend emerges.


AMBA has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 10 days, AMBA underperformed the SP500 index on 50% days. Which indicates that on days AMBA underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

AMBA was profitable on 50% days in the last three months. During this time, it delivered on average +0.09% per day. It delivered it's best daily return of +18.49%, during this period, on Friday, 30 Nov, 2018. There was initially a bearish trend during this period which started on 2 Oct, 2018 and went on till 10 Oct, 2018. The trend delivered -19.11% losses to investors. This was followed by a bullish trend that started on 29 Oct, 2018 and ended on 2 Nov, 2018. This bullish trend delivered +8.89% to investors.

On monthly basis, AMBA delivered losses in more months over the last year, than profits. AMBA delivered profits less regularly than SP500 index. AMBA was also a more risky investment than SP500 index as it's worst month in the last year, Jun 2018, returned -20.98% compared to -7.28% returned by SP500 index in Oct 2018. AMBA and SP500 index, both had periods of 2 consecutive losing months.

Thirty to 40 years ago, most financial decisions were fairly simple.
-- Scott Cook

AMBA is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in AMBA's volatility from 3 Oct, 2018 to 7 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that AMBA has significant positive skewness in it's return distribution. This indicates that investors can expect AMBA to recover from drawdowns quickly. Which makes AMBA a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in AMBA derivatives at this moment can consider 'Long Straddle' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than AMBA. Therefore, SP500 must receive a lower allocation than AMBA in your portfolio. SP500 index usually has shorter drawdown period than AMBA.

Based on your interest in AMBA you may find it interesting to know that ADUS and LOV have both performed similar to AMBA and can be considered by investors as alternative investment options.

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