Correlation Between NVIDIA and Lumen Technologies
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Lumen Technologies 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 Lumen Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Lumen Technologies, you can compare the effects of market volatilities on NVIDIA and Lumen Technologies 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 Lumen Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Lumen Technologies.
Diversification Opportunities for NVIDIA and Lumen Technologies
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NVIDIA and Lumen is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of NVIDIA i.e., NVIDIA and Lumen Technologies go up and down completely randomly.
Pair Corralation between NVIDIA and Lumen Technologies
Given the investment horizon of 90 days NVIDIA is expected to generate 0.67 times more return on investment than Lumen Technologies. However, NVIDIA is 1.48 times less risky than Lumen Technologies. It trades about -0.15 of its potential returns per unit of risk. Lumen Technologies is currently generating about -0.46 per unit of risk. If you would invest 14,828 in NVIDIA on September 13, 2024 and sell it today you would lose (1,162) from holding NVIDIA or give up 7.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Lumen Technologies
Performance |
| Timeline |
| NVIDIA |
| Lumen Technologies |
NVIDIA and Lumen Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Lumen Technologies
The main advantage of trading using opposite NVIDIA and Lumen Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Lumen Technologies 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 Lumen Technologies will offset losses from the drop in Lumen Technologies' long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Lumen Technologies vs. Verizon Communications | Lumen Technologies vs. T Mobile | Lumen Technologies vs. Comcast Corp | Lumen Technologies vs. ATT Inc |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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