Correlation Between NVIDIA and British American
Can any of the company-specific risk be diversified away by investing in both NVIDIA and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and British American Tobacco, you can compare the effects of market volatilities on NVIDIA and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and British American.
Diversification Opportunities for NVIDIA and British American
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NVIDIA and British is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of NVIDIA i.e., NVIDIA and British American go up and down completely randomly.
Pair Corralation between NVIDIA and British American
Assuming the 90 days trading horizon NVIDIA is expected to generate 2.58 times more return on investment than British American. However, NVIDIA is 2.58 times more volatile than British American Tobacco. It trades about 0.15 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.38 per unit of risk. If you would invest 1,655 in NVIDIA on August 24, 2024 and sell it today you would earn a total of 124.00 from holding NVIDIA or generate 7.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. British American Tobacco
Performance |
| Timeline |
| NVIDIA |
| British American Tobacco |
NVIDIA and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and British American
The main advantage of trading using opposite NVIDIA and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| NVIDIA vs. Tyson Foods | NVIDIA vs. United States Steel | NVIDIA vs. Tres Tentos Agroindustrial | NVIDIA vs. Multilaser Industrial SA |
| British American vs. BTG Pactual Logstica | British American vs. Plano Plano Desenvolvimento | British American vs. Companhia Habitasul de | British American vs. The Procter Gamble |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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