Correlation Between NVIDIA and Shopify
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Shopify 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 Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Shopify, you can compare the effects of market volatilities on NVIDIA and Shopify 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 Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Shopify.
Diversification Opportunities for NVIDIA and Shopify
Poor diversification
The 3 months correlation between NVIDIA and Shopify is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of NVIDIA i.e., NVIDIA and Shopify go up and down completely randomly.
Pair Corralation between NVIDIA and Shopify
Given the investment horizon of 90 days NVIDIA is expected to generate 0.91 times more return on investment than Shopify. However, NVIDIA is 1.1 times less risky than Shopify. It trades about 0.15 of its potential returns per unit of risk. Shopify is currently generating about 0.07 per unit of risk. If you would invest 1,598 in NVIDIA on August 27, 2024 and sell it today you would earn a total of 12,597 from holding NVIDIA or generate 788.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Shopify
Performance |
| Timeline |
| NVIDIA |
| Shopify |
NVIDIA and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Shopify
The main advantage of trading using opposite NVIDIA and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify'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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Positions Ratings 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 | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |