Correlation Between NVIDIA and Catalyst Metals

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Can any of the company-specific risk be diversified away by investing in both NVIDIA and Catalyst Metals 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 Catalyst Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Catalyst Metals Limited, you can compare the effects of market volatilities on NVIDIA and Catalyst Metals 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 Catalyst Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Catalyst Metals.

Diversification Opportunities for NVIDIA and Catalyst Metals

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between NVIDIA and Catalyst is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of NVIDIA i.e., NVIDIA and Catalyst Metals go up and down completely randomly.

Pair Corralation between NVIDIA and Catalyst Metals

Given the investment horizon of 90 days NVIDIA is expected to generate 0.4 times more return on investment than Catalyst Metals. However, NVIDIA is 2.5 times less risky than Catalyst Metals. It trades about 0.11 of its potential returns per unit of risk. Catalyst Metals Limited is currently generating about 0.0 per unit of risk. If you would invest  12,144  in NVIDIA on August 30, 2024 and sell it today you would earn a total of  1,390  from holding NVIDIA or generate 11.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

NVIDIA  vs.  Catalyst Metals Limited

 Performance 
       Timeline  
NVIDIA 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.
Catalyst Metals 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Catalyst Metals reported solid returns over the last few months and may actually be approaching a breakup point.

NVIDIA and Catalyst Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NVIDIA and Catalyst Metals

The main advantage of trading using opposite NVIDIA and Catalyst Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Catalyst Metals 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 Catalyst Metals will offset losses from the drop in Catalyst Metals' long position.
The idea behind NVIDIA and Catalyst Metals Limited 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.
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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 Managers module to screen money managers from public funds and ETFs managed around the world.

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