Correlation Between NVIDIA and Federal National
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Federal National 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 Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Federal National Mortgage, you can compare the effects of market volatilities on NVIDIA and Federal National 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 Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Federal National.
Diversification Opportunities for NVIDIA and Federal National
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between NVIDIA and Federal is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of NVIDIA i.e., NVIDIA and Federal National go up and down completely randomly.
Pair Corralation between NVIDIA and Federal National
Given the investment horizon of 90 days NVIDIA is expected to generate 1.77 times less return on investment than Federal National. But when comparing it to its historical volatility, NVIDIA is 2.37 times less risky than Federal National. It trades about 0.12 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 251.00 in Federal National Mortgage on November 27, 2024 and sell it today you would earn a total of 1,534 from holding Federal National Mortgage or generate 611.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Federal National Mortgage
Performance |
| Timeline |
| NVIDIA |
| Federal National Mortgage |
NVIDIA and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Federal National
The main advantage of trading using opposite NVIDIA and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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