Correlation Between NVIDIA Corp and Bankers Investment

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

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

Diversification Opportunities for NVIDIA Corp and Bankers Investment

0.62

Correlation Coefficient

NVIDIA Corp  Bankers Investment

Poor diversification

The 3 months correlation between NVIDIA and Bankers is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA Corp and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust 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 Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of NVIDIA Corp i.e., NVIDIA Corp and Bankers Investment go up and down completely randomly.

Pair Corralation between NVIDIA Corp and Bankers Investment

Assuming the 90 days trading horizon NVIDIA Corp is expected to generate 3.96 times more return on investment than Bankers Investment. However, NVIDIA Corp is 3.96 times more volatile than Bankers Investment Trust. It trades about 0.1 of its potential returns per unit of risk. Bankers Investment Trust is currently generating about 0.11 per unit of risk. If you would invest  11,535  in NVIDIA Corp on September 17, 2024 and sell it today you would earn a total of  1,724  from holding NVIDIA Corp or generate 14.95% return on investment over 90 days.

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

NVIDIA Corp  vs.  Bankers Investment Trust

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.

Bankers Investment Trust

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NVIDIA Corp and Bankers Investment

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

The idea behind NVIDIA Corp and Bankers Investment Trust 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.