Correlation Between NVIDIA and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both NVIDIA and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and STMicroelectronics NV, you can compare the effects of market volatilities on NVIDIA and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and STMicroelectronics.
Diversification Opportunities for NVIDIA and STMicroelectronics
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NVIDIA and STMicroelectronics is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of NVIDIA i.e., NVIDIA and STMicroelectronics go up and down completely randomly.
Pair Corralation between NVIDIA and STMicroelectronics
Assuming the 90 days horizon NVIDIA is expected to generate 1.11 times more return on investment than STMicroelectronics. However, NVIDIA is 1.11 times more volatile than STMicroelectronics NV. It trades about 0.01 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.18 per unit of risk. If you would invest 13,006 in NVIDIA on August 30, 2024 and sell it today you would lose (36.00) from holding NVIDIA or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. STMicroelectronics NV
Performance |
| Timeline |
| NVIDIA |
| STMicroelectronics |
NVIDIA and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and STMicroelectronics
The main advantage of trading using opposite NVIDIA and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.The idea behind NVIDIA and STMicroelectronics NV 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.| STMicroelectronics vs. New Residential Investment | STMicroelectronics vs. Citic Telecom International | STMicroelectronics vs. Iridium Communications | STMicroelectronics vs. SEI INVESTMENTS |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |