Correlation Between NVIDIA Corp and IDEXX Laboratories

Can any of the company-specific risk be diversified away by investing in both NVIDIA Corp and IDEXX Laboratories 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 Corp and IDEXX Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NVIDIA Corp and IDEXX Laboratories, you can compare the effects of market volatilities on NVIDIA Corp and IDEXX Laboratories 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 Corp with a short position of IDEXX Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA Corp and IDEXX Laboratories.

Diversification Opportunities for NVIDIA Corp and IDEXX Laboratories

-0.84

Correlation Coefficient

NVIDIA Corp  IDEXX Laboratories

Pay attention - limited upside

The 3 months correlation between NVIDIA and IDEXX is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA Corp and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories and NVIDIA Corp 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 Corp are associated (or correlated) with IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of NVIDIA Corp i.e., NVIDIA Corp and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between NVIDIA Corp and IDEXX Laboratories

Assuming the 90 days trading horizon NVIDIA Corp is expected to under-perform the IDEXX Laboratories. In addition to that, NVIDIA Corp is 1.6 times more volatile than IDEXX Laboratories. It trades about -0.1 of its total potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.11 per unit of volatility. If you would invest  42,107  in IDEXX Laboratories on September 17, 2024 and sell it today you would earn a total of  1,310  from holding IDEXX Laboratories or generate 3.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NVIDIA Corp  vs.  IDEXX Laboratories

NVIDIA Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NVIDIA Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEXX Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NVIDIA Corp and IDEXX Laboratories

The main advantage of trading using opposite NVIDIA Corp and IDEXX Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA Corp position performs unexpectedly, IDEXX Laboratories 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 IDEXX Laboratories will offset losses from the drop in IDEXX Laboratories' long position.

The idea behind NVIDIA Corp and IDEXX Laboratories pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.