Correlation Between NVIDIA and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Bayerische Motoren 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 Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Bayerische Motoren Werke, you can compare the effects of market volatilities on NVIDIA and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Bayerische Motoren.
Diversification Opportunities for NVIDIA and Bayerische Motoren
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NVIDIA and Bayerische is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of NVIDIA i.e., NVIDIA and Bayerische Motoren go up and down completely randomly.
Pair Corralation between NVIDIA and Bayerische Motoren
Given the investment horizon of 90 days NVIDIA is expected to generate 1.52 times more return on investment than Bayerische Motoren. However, NVIDIA is 1.52 times more volatile than Bayerische Motoren Werke. It trades about 0.0 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.22 per unit of risk. If you would invest 13,934 in NVIDIA on August 31, 2024 and sell it today you would lose (109.00) from holding NVIDIA or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NVIDIA vs. Bayerische Motoren Werke
Performance |
| Timeline |
| NVIDIA |
| Bayerische Motoren Werke |
NVIDIA and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Bayerische Motoren
The main advantage of trading using opposite NVIDIA and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Bayerische Motoren vs. Bayerische Motoren Werke | Bayerische Motoren vs. Honda Motor Co | Bayerische Motoren vs. Volkswagen AG VZO | Bayerische Motoren vs. Volkswagen AG |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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