Correlation Between NVIDIA and Carters
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Carters 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 Carters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Carters, you can compare the effects of market volatilities on NVIDIA and Carters 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 Carters. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Carters.
Diversification Opportunities for NVIDIA and Carters
Very good diversification
The 3 months correlation between NVIDIA and Carters is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of NVIDIA i.e., NVIDIA and Carters go up and down completely randomly.
Pair Corralation between NVIDIA and Carters
Assuming the 90 days trading horizon NVIDIA is expected to generate 45.82 times more return on investment than Carters. However, NVIDIA is 45.82 times more volatile than Carters. It trades about 0.1 of its potential returns per unit of risk. Carters is currently generating about 0.0 per unit of risk. If you would invest 402.00 in NVIDIA on August 27, 2024 and sell it today you would earn a total of 1,303 from holding NVIDIA or generate 324.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 49.07% |
| Values | Daily Returns |
NVIDIA vs. Carters
Performance |
| Timeline |
| NVIDIA |
| Carters |
NVIDIA and Carters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Carters
The main advantage of trading using opposite NVIDIA and Carters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Carters 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 Carters will offset losses from the drop in Carters' long position.| NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Broadcom | NVIDIA vs. NXP Semiconductors NV | NVIDIA vs. STMicroelectronics NV |
| Carters vs. Taiwan Semiconductor Manufacturing | Carters vs. Zoom Video Communications | Carters vs. Warner Music Group | Carters vs. Multilaser Industrial SA |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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