Correlation Between NVIDIA Corp and British American
Can any of the company-specific risk be diversified away by investing in both NVIDIA Corp and British American 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 NVIDIA Corp and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA Corp and British American Tobacco, you can compare the effects of market volatilities on NVIDIA Corp and British American 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 NVIDIA Corp with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA Corp and British American.
Diversification Opportunities for NVIDIA Corp and British American
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NVIDIA and British is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA Corp and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and NVIDIA Corp 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 NVIDIA Corp are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of NVIDIA Corp i.e., NVIDIA Corp and British American go up and down completely randomly.
Pair Corralation between NVIDIA Corp and British American
Assuming the 90 days trading horizon NVIDIA Corp is expected to under-perform the British American. In addition to that, NVIDIA Corp is 3.39 times more volatile than British American Tobacco. It trades about -0.05 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.49 per unit of volatility. If you would invest 3,489 in British American Tobacco on August 29, 2024 and sell it today you would earn a total of 264.00 from holding British American Tobacco or generate 7.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA Corp vs. British American Tobacco
Performance |
| Timeline |
| NVIDIA Corp |
| British American Tobacco |
NVIDIA Corp and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA Corp and British American
The main advantage of trading using opposite NVIDIA Corp and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA Corp position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| NVIDIA Corp vs. Gaztransport et Technigaz | NVIDIA Corp vs. Wheaton Precious Metals | NVIDIA Corp vs. Datagroup SE | NVIDIA Corp vs. Cornish Metals |
| British American vs. Lendinvest PLC | British American vs. Neometals | British American vs. Coor Service Management | British American vs. Albion Technology General |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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