Correlation Between NVIDIA and ITT
Can any of the company-specific risk be diversified away by investing in both NVIDIA and ITT 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 ITT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and ITT Inc, you can compare the effects of market volatilities on NVIDIA and ITT 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 ITT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and ITT.
Diversification Opportunities for NVIDIA and ITT
Poor diversification
The 3 months correlation between NVIDIA and ITT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT Inc 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 ITT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITT Inc has no effect on the direction of NVIDIA i.e., NVIDIA and ITT go up and down completely randomly.
Pair Corralation between NVIDIA and ITT
Given the investment horizon of 90 days NVIDIA is expected to generate 1.96 times more return on investment than ITT. However, NVIDIA is 1.96 times more volatile than ITT Inc. It trades about 0.08 of its potential returns per unit of risk. ITT Inc is currently generating about 0.08 per unit of risk. If you would invest 11,388 in NVIDIA on August 24, 2024 and sell it today you would earn a total of 3,279 from holding NVIDIA or generate 28.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. ITT Inc
Performance |
| Timeline |
| NVIDIA |
| ITT Inc |
NVIDIA and ITT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and ITT
The main advantage of trading using opposite NVIDIA and ITT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, ITT 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 ITT will offset losses from the drop in ITT'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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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