Correlation Between NVIDIA and US Dollar
Can any of the company-specific risk be diversified away by investing in both NVIDIA and US Dollar 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 US Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and US Dollar, you can compare the effects of market volatilities on NVIDIA and US Dollar 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 US Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and US Dollar.
Diversification Opportunities for NVIDIA and US Dollar
Very poor diversification
The 3 months correlation between NVIDIA and DXUSD is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and US Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Dollar 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 US Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Dollar has no effect on the direction of NVIDIA i.e., NVIDIA and US Dollar go up and down completely randomly.
Pair Corralation between NVIDIA and US Dollar
Given the investment horizon of 90 days NVIDIA is expected to generate 7.88 times more return on investment than US Dollar. However, NVIDIA is 7.88 times more volatile than US Dollar. It trades about 0.13 of its potential returns per unit of risk. US Dollar is currently generating about 0.02 per unit of risk. If you would invest 3,850 in NVIDIA on August 31, 2024 and sell it today you would earn a total of 9,975 from holding NVIDIA or generate 259.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.94% |
| Values | Daily Returns |
NVIDIA vs. US Dollar
Performance |
| Timeline |
| NVIDIA |
| US Dollar |
NVIDIA and US Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and US Dollar
The main advantage of trading using opposite NVIDIA and US Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, US Dollar 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 US Dollar will offset losses from the drop in US Dollar's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| US Dollar vs. Micro Silver Futures | US Dollar vs. 30 Day Fed | US Dollar vs. Mini Dow Jones | US Dollar vs. Gasoline RBOB |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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