Correlation Between NVIDIA and Energy
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Energy 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 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Energy and Water, you can compare the effects of market volatilities on NVIDIA and Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Energy.
Diversification Opportunities for NVIDIA and Energy
Pay attention - limited upside
The 3 months correlation between NVIDIA and Energy is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of NVIDIA i.e., NVIDIA and Energy go up and down completely randomly.
Pair Corralation between NVIDIA and Energy
Given the investment horizon of 90 days NVIDIA is expected to generate 0.17 times more return on investment than Energy. However, NVIDIA is 5.86 times less risky than Energy. It trades about -0.06 of its potential returns per unit of risk. Energy and Water is currently generating about -0.12 per unit of risk. If you would invest 14,125 in NVIDIA on August 30, 2024 and sell it today you would lose (591.00) from holding NVIDIA or give up 4.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NVIDIA vs. Energy and Water
Performance |
| Timeline |
| NVIDIA |
| Energy and Water |
NVIDIA and Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Energy
The main advantage of trading using opposite NVIDIA and Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Energy 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 Energy will offset losses from the drop in Energy's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Energy vs. Vow ASA | Energy vs. Eestech | Energy vs. One World Universe | Energy vs. Bion Environmental Technologies |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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