Correlation Between NVIDIA and Cato
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Cato 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 Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Cato Corporation, you can compare the effects of market volatilities on NVIDIA and Cato 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 Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Cato.
Diversification Opportunities for NVIDIA and Cato
Very poor diversification
The 3 months correlation between NVIDIA and Cato is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato 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 Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of NVIDIA i.e., NVIDIA and Cato go up and down completely randomly.
Pair Corralation between NVIDIA and Cato
Given the investment horizon of 90 days NVIDIA is expected to generate 0.42 times more return on investment than Cato. However, NVIDIA is 2.36 times less risky than Cato. It trades about 0.11 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.07 per unit of risk. If you would invest 13,956 in NVIDIA on August 24, 2024 and sell it today you would earn a total of 711.00 from holding NVIDIA or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Cato Corp.
Performance |
| Timeline |
| NVIDIA |
| Cato |
NVIDIA and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Cato
The main advantage of trading using opposite NVIDIA and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Cato 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 Cato will offset losses from the drop in Cato'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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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