Correlation Between SK Hynix and NVIDIA
Can any of the company-specific risk be diversified away by investing in both SK Hynix and NVIDIA 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 SK Hynix and NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK hynix and NVIDIA, you can compare the effects of market volatilities on SK Hynix and NVIDIA 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 SK Hynix with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and NVIDIA.
Diversification Opportunities for SK Hynix and NVIDIA
Poor diversification
The 3 months correlation between HY9H and NVIDIA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SK hynix and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and SK Hynix 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 SK hynix are associated (or correlated) with NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of SK Hynix i.e., SK Hynix and NVIDIA go up and down completely randomly.
Pair Corralation between SK Hynix and NVIDIA
Assuming the 90 days trading horizon SK hynix is expected to under-perform the NVIDIA. In addition to that, SK Hynix is 1.31 times more volatile than NVIDIA. It trades about -0.17 of its total potential returns per unit of risk. NVIDIA is currently generating about 0.13 per unit of volatility. If you would invest 12,294 in NVIDIA on September 1, 2024 and sell it today you would earn a total of 812.00 from holding NVIDIA or generate 6.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SK hynix vs. NVIDIA
Performance |
| Timeline |
| SK hynix |
| NVIDIA |
SK Hynix and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Hynix and NVIDIA
The main advantage of trading using opposite SK Hynix and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Hynix position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.The idea behind SK hynix and NVIDIA 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.| NVIDIA vs. CHIBA BANK | NVIDIA vs. Heartland Financial USA | NVIDIA vs. Ameriprise Financial | NVIDIA vs. Arrow Electronics |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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