Correlation Between NVIDIA and US Treasury
Can any of the company-specific risk be diversified away by investing in both NVIDIA and US Treasury 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 US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and US Treasury 6, you can compare the effects of market volatilities on NVIDIA and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and US Treasury.
Diversification Opportunities for NVIDIA and US Treasury
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NVIDIA and XBIL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and US Treasury 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 6 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 US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 6 has no effect on the direction of NVIDIA i.e., NVIDIA and US Treasury go up and down completely randomly.
Pair Corralation between NVIDIA and US Treasury
Given the investment horizon of 90 days NVIDIA is expected to generate 129.37 times more return on investment than US Treasury. However, NVIDIA is 129.37 times more volatile than US Treasury 6. It trades about 0.15 of its potential returns per unit of risk. US Treasury 6 is currently generating about 0.79 per unit of risk. If you would invest 4,781 in NVIDIA on August 24, 2024 and sell it today you would earn a total of 9,886 from holding NVIDIA or generate 206.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. US Treasury 6
Performance |
| Timeline |
| NVIDIA |
| US Treasury 6 |
NVIDIA and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and US Treasury
The main advantage of trading using opposite NVIDIA and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury's long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| US Treasury vs. Rbb Fund | US Treasury vs. US Treasury 12 | US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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