Correlation Between NVIDIA and GMX
Can any of the company-specific risk be diversified away by investing in both NVIDIA and GMX 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 GMX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and GMX, you can compare the effects of market volatilities on NVIDIA and GMX 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 GMX. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and GMX.
Diversification Opportunities for NVIDIA and GMX
Average diversification
The 3 months correlation between NVIDIA and GMX is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and GMX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMX 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 GMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMX has no effect on the direction of NVIDIA i.e., NVIDIA and GMX go up and down completely randomly.
Pair Corralation between NVIDIA and GMX
Given the investment horizon of 90 days NVIDIA is expected to generate 5.72 times less return on investment than GMX. But when comparing it to its historical volatility, NVIDIA is 2.71 times less risky than GMX. It trades about 0.11 of its potential returns per unit of risk. GMX is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,274 in GMX on August 24, 2024 and sell it today you would earn a total of 723.00 from holding GMX or generate 31.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. GMX
Performance |
| Timeline |
| NVIDIA |
| GMX |
NVIDIA and GMX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and GMX
The main advantage of trading using opposite NVIDIA and GMX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, GMX 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 GMX will offset losses from the drop in GMX'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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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