Correlation Between NVIDIA and E Mini
Can any of the company-specific risk be diversified away by investing in both NVIDIA and E Mini 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 E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and E Mini SP 500, you can compare the effects of market volatilities on NVIDIA and E Mini 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 E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and E Mini.
Diversification Opportunities for NVIDIA and E Mini
Very poor diversification
The 3 months correlation between NVIDIA and ESUSD is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP 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 E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of NVIDIA i.e., NVIDIA and E Mini go up and down completely randomly.
Pair Corralation between NVIDIA and E Mini
Given the investment horizon of 90 days NVIDIA is expected to generate 3.95 times more return on investment than E Mini. However, NVIDIA is 3.95 times more volatile than E Mini SP 500. It trades about 0.15 of its potential returns per unit of risk. E Mini SP 500 is currently generating about 0.1 per unit of risk. If you would invest 1,660 in NVIDIA on August 26, 2024 and sell it today you would earn a total of 12,535 from holding NVIDIA or generate 755.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.26% |
| Values | Daily Returns |
NVIDIA vs. E Mini SP 500
Performance |
| Timeline |
| NVIDIA |
| E Mini SP |
NVIDIA and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and E Mini
The main advantage of trading using opposite NVIDIA and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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