Correlation Between NVIDIA and Valens
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Valens 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 Valens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Valens, you can compare the effects of market volatilities on NVIDIA and Valens 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 Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Valens.
Diversification Opportunities for NVIDIA and Valens
Very good diversification
The 3 months correlation between NVIDIA and Valens is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of NVIDIA i.e., NVIDIA and Valens go up and down completely randomly.
Pair Corralation between NVIDIA and Valens
Given the investment horizon of 90 days NVIDIA is expected to under-perform the Valens. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 2.6 times less risky than Valens. The stock trades about -0.15 of its potential returns per unit of risk. The Valens is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 191.00 in Valens on September 13, 2024 and sell it today you would earn a total of 29.50 from holding Valens or generate 15.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Valens
Performance |
| Timeline |
| NVIDIA |
| Valens |
NVIDIA and Valens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Valens
The main advantage of trading using opposite NVIDIA and Valens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Valens 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 Valens will offset losses from the drop in Valens' long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Valens vs. Wolfspeed | Valens vs. GSI Technology | Valens vs. Lattice Semiconductor | Valens vs. ON Semiconductor |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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