Correlation Between Visa and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and NVIDIA, you can compare the effects of market volatilities on Visa 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 Visa with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and NVIDIA.
Diversification Opportunities for Visa and NVIDIA
Average diversification
The 3 months correlation between Visa and NVIDIA is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Visa 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 Visa Class A 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 Visa i.e., Visa and NVIDIA go up and down completely randomly.
Pair Corralation between Visa and NVIDIA
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.19 times more return on investment than NVIDIA. However, Visa Class A is 5.3 times less risky than NVIDIA. It trades about 0.5 of its potential returns per unit of risk. NVIDIA is currently generating about -0.15 per unit of risk. If you would invest 31,304 in Visa Class A on November 6, 2024 and sell it today you would earn a total of 3,082 from holding Visa Class A or generate 9.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. NVIDIA
Performance |
| Timeline |
| Visa Class A |
| NVIDIA |
Visa and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and NVIDIA
The main advantage of trading using opposite Visa and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
| NVIDIA vs. Lattice Semiconductor | NVIDIA vs. Nexstar Media Group | NVIDIA vs. ELMOS SEMICONDUCTOR | NVIDIA vs. PROSIEBENSAT1 MEDIADR4 |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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