Correlation Between NVIDIA and Optical Cable
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Optical Cable 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 Optical Cable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Optical Cable, you can compare the effects of market volatilities on NVIDIA and Optical Cable 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 Optical Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Optical Cable.
Diversification Opportunities for NVIDIA and Optical Cable
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NVIDIA and Optical is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Optical Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optical Cable 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 Optical Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optical Cable has no effect on the direction of NVIDIA i.e., NVIDIA and Optical Cable go up and down completely randomly.
Pair Corralation between NVIDIA and Optical Cable
Given the investment horizon of 90 days NVIDIA is expected to generate 3.86 times less return on investment than Optical Cable. But when comparing it to its historical volatility, NVIDIA is 14.03 times less risky than Optical Cable. It trades about 0.14 of its potential returns per unit of risk. Optical Cable is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 356.00 in Optical Cable on September 3, 2024 and sell it today you would lose (123.00) from holding Optical Cable or give up 34.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Optical Cable
Performance |
| Timeline |
| NVIDIA |
| Optical Cable |
NVIDIA and Optical Cable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Optical Cable
The main advantage of trading using opposite NVIDIA and Optical Cable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Optical Cable 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 Optical Cable will offset losses from the drop in Optical Cable's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Optical Cable vs. KVH Industries | Optical Cable vs. Knowles Cor | Optical Cable vs. Comtech Telecommunications Corp | Optical Cable vs. Lantronix |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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