Correlation Between NVIDIA and Roku
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Roku 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 Roku into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Roku Inc, you can compare the effects of market volatilities on NVIDIA and Roku 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 Roku. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Roku.
Diversification Opportunities for NVIDIA and Roku
Weak diversification
The 3 months correlation between NVIDIA and Roku is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku 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 Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of NVIDIA i.e., NVIDIA and Roku go up and down completely randomly.
Pair Corralation between NVIDIA and Roku
Given the investment horizon of 90 days NVIDIA is expected to generate 0.8 times more return on investment than Roku. However, NVIDIA is 1.25 times less risky than Roku. It trades about 0.15 of its potential returns per unit of risk. Roku Inc is currently generating about 0.03 per unit of risk. If you would invest 1,660 in NVIDIA on August 24, 2024 and sell it today you would earn a total of 13,007 from holding NVIDIA or generate 783.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Roku Inc
Performance |
| Timeline |
| NVIDIA |
| Roku Inc |
NVIDIA and Roku Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Roku
The main advantage of trading using opposite NVIDIA and Roku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Roku 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 Roku will offset losses from the drop in Roku's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Roku vs. Walt Disney | Roku vs. AMC Entertainment Holdings | Roku vs. Paramount Global Class | Roku vs. Warner Bros Discovery |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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