Correlation Between NVIDIA Corp and Target Corp

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

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

Diversification Opportunities for NVIDIA Corp and Target Corp

0.69

Correlation Coefficient

NVIDIA Corp  Target Corp

Poor diversification

The 3 months correlation between NVIDIA and Target is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA Corp and Target Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Corp 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 Target Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Corp has no effect on the direction of NVIDIA Corp i.e., NVIDIA Corp and Target Corp go up and down completely randomly.

Pair Corralation between NVIDIA Corp and Target Corp

Assuming the 90 days trading horizon NVIDIA Corp is expected to generate 2.12 times more return on investment than Target Corp. However, NVIDIA Corp is 2.12 times more volatile than Target Corp. It trades about -0.08 of its potential returns per unit of risk. Target Corp is currently generating about -0.21 per unit of risk. If you would invest  13,912  in NVIDIA Corp on December 30, 2024 and sell it today you would lose (2,975) from holding NVIDIA Corp or give up 21.38% of portfolio value over 90 days.

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

NVIDIA Corp  vs.  Target Corp

NVIDIA Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA Corp 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Target Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Target Corp 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 April 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 Target Corp

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

The idea behind NVIDIA Corp and Target Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.