Correlation Between NVIDIA and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Applied Industrial 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 Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Applied Industrial Technologies, you can compare the effects of market volatilities on NVIDIA and Applied Industrial 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 Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Applied Industrial.
Diversification Opportunities for NVIDIA and Applied Industrial
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NVIDIA and Applied is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial 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 Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of NVIDIA i.e., NVIDIA and Applied Industrial go up and down completely randomly.
Pair Corralation between NVIDIA and Applied Industrial
Given the investment horizon of 90 days NVIDIA is expected to generate 1.81 times more return on investment than Applied Industrial. However, NVIDIA is 1.81 times more volatile than Applied Industrial Technologies. It trades about 0.15 of its potential returns per unit of risk. Applied Industrial Technologies is currently generating about 0.1 per unit of risk. If you would invest 1,598 in NVIDIA on August 27, 2024 and sell it today you would earn a total of 12,597 from holding NVIDIA or generate 788.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Applied Industrial Technologie
Performance |
| Timeline |
| NVIDIA |
| Applied Industrial |
NVIDIA and Applied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Applied Industrial
The main advantage of trading using opposite NVIDIA and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Applied Industrial 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Applied Industrial vs. Global Industrial Co | Applied Industrial vs. BlueLinx Holdings | Applied Industrial vs. WESCO International | Applied Industrial vs. MSC Industrial Direct |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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