Correlation Between NVIDIA and International Business
Can any of the company-specific risk be diversified away by investing in both NVIDIA and International Business 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 and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and International Business Machines, you can compare the effects of market volatilities on NVIDIA and International Business 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 with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and International Business.
Diversification Opportunities for NVIDIA and International Business
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NVIDIA and International is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and NVIDIA 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 are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of NVIDIA i.e., NVIDIA and International Business go up and down completely randomly.
Pair Corralation between NVIDIA and International Business
Assuming the 90 days horizon NVIDIA is expected to generate 2.13 times more return on investment than International Business. However, NVIDIA is 2.13 times more volatile than International Business Machines. It trades about 0.13 of its potential returns per unit of risk. International Business Machines is currently generating about 0.12 per unit of risk. If you would invest 3,564 in NVIDIA on August 31, 2024 and sell it today you would earn a total of 9,436 from holding NVIDIA or generate 264.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. International Business Machine
Performance |
| Timeline |
| NVIDIA |
| International Business |
NVIDIA and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and International Business
The main advantage of trading using opposite NVIDIA and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.The idea behind NVIDIA and International Business Machines 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.| International Business vs. FUJITSU LTD ADR | International Business vs. Superior Plus Corp | International Business vs. NMI Holdings | International Business vs. Origin Agritech |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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