Correlation Between NVIDIA and SPDR SP
Can any of the company-specific risk be diversified away by investing in both NVIDIA and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and SPDR SP Global, you can compare the effects of market volatilities on NVIDIA and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and SPDR SP.
Diversification Opportunities for NVIDIA and SPDR SP
Very weak diversification
The 3 months correlation between NVIDIA and SPDR is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of NVIDIA i.e., NVIDIA and SPDR SP go up and down completely randomly.
Pair Corralation between NVIDIA and SPDR SP
Given the investment horizon of 90 days NVIDIA is expected to generate 3.03 times more return on investment than SPDR SP. However, NVIDIA is 3.03 times more volatile than SPDR SP Global. It trades about 0.03 of its potential returns per unit of risk. SPDR SP Global is currently generating about 0.06 per unit of risk. If you would invest 14,052 in NVIDIA on August 27, 2024 and sell it today you would earn a total of 143.00 from holding NVIDIA or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. SPDR SP Global
Performance |
| Timeline |
| NVIDIA |
| SPDR SP Global |
NVIDIA and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and SPDR SP
The main advantage of trading using opposite NVIDIA and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
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 Stocks Directory module to find actively traded stocks across global markets.
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