Correlation Between Trade Desk and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Trade Desk and NVIDIA 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 Trade Desk and NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Trade Desk and NVIDIA, you can compare the effects of market volatilities on Trade Desk and NVIDIA 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 Trade Desk with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and NVIDIA.
Diversification Opportunities for Trade Desk and NVIDIA
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Trade and NVIDIA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Trade Desk 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 The Trade Desk are associated (or correlated) with NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Trade Desk i.e., Trade Desk and NVIDIA go up and down completely randomly.
Pair Corralation between Trade Desk and NVIDIA
Assuming the 90 days trading horizon The Trade Desk is expected to generate 0.96 times more return on investment than NVIDIA. However, The Trade Desk is 1.04 times less risky than NVIDIA. It trades about 0.22 of its potential returns per unit of risk. NVIDIA is currently generating about 0.16 per unit of risk. If you would invest 592.00 in The Trade Desk on September 13, 2024 and sell it today you would earn a total of 210.00 from holding The Trade Desk or generate 35.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Trade Desk vs. NVIDIA
Performance |
| Timeline |
| Trade Desk |
| NVIDIA |
Trade Desk and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trade Desk and NVIDIA
The main advantage of trading using opposite Trade Desk and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| Trade Desk vs. MAHLE Metal Leve | Trade Desk vs. Credit Acceptance | Trade Desk vs. British American Tobacco | Trade Desk vs. Southwest Airlines Co |
| NVIDIA vs. The Home Depot | NVIDIA vs. CM Hospitalar SA | NVIDIA vs. Teladoc Health | NVIDIA vs. Marvell 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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