Correlation Between NVIDIA and Blue Moon
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Blue Moon 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 Blue Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Blue Moon Metals, you can compare the effects of market volatilities on NVIDIA and Blue Moon 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 Blue Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Blue Moon.
Diversification Opportunities for NVIDIA and Blue Moon
Poor diversification
The 3 months correlation between NVIDIA and Blue is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Blue Moon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon Metals 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Metals has no effect on the direction of NVIDIA i.e., NVIDIA and Blue Moon go up and down completely randomly.
Pair Corralation between NVIDIA and Blue Moon
Given the investment horizon of 90 days NVIDIA is expected to generate 0.69 times more return on investment than Blue Moon. However, NVIDIA is 1.45 times less risky than Blue Moon. It trades about 0.03 of its potential returns per unit of risk. Blue Moon Metals is currently generating about -0.04 per unit of risk. If you would invest 14,052 in NVIDIA on August 27, 2024 and sell it today you would earn a total of 143.00 from holding NVIDIA or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Blue Moon Metals
Performance |
| Timeline |
| NVIDIA |
| Blue Moon Metals |
NVIDIA and Blue Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Blue Moon
The main advantage of trading using opposite NVIDIA and Blue Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Blue Moon 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 Blue Moon will offset losses from the drop in Blue Moon's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
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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