Correlation Between United States and NVIDIA
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and NVIDIA, you can compare the effects of market volatilities on United States 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 United States with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and NVIDIA.
Diversification Opportunities for United States and NVIDIA
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and NVIDIA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and United States 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 United States Steel 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 United States i.e., United States and NVIDIA go up and down completely randomly.
Pair Corralation between United States and NVIDIA
Given the investment horizon of 90 days United States Steel is expected to under-perform the NVIDIA. In addition to that, United States is 1.76 times more volatile than NVIDIA. It trades about -0.23 of its total potential returns per unit of risk. NVIDIA is currently generating about -0.27 per unit of volatility. If you would invest 717,000 in NVIDIA on September 13, 2024 and sell it today you would lose (94,000) from holding NVIDIA or give up 13.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
United States Steel vs. NVIDIA
Performance |
| Timeline |
| United States Steel |
| NVIDIA |
United States and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and NVIDIA
The main advantage of trading using opposite United States and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Edesa Holding SA | United States vs. Vista Energy, SAB | United States vs. Pfizer Inc | United States vs. Molinos Agro SA |
| NVIDIA vs. Intel Corp CEDEAR | NVIDIA vs. Edesa Holding SA | NVIDIA vs. Longvie SA | NVIDIA vs. Vista Energy, SAB |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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