Correlation Between Gaztransport Technigaz and NVIDIA

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

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

Diversification Opportunities for Gaztransport Technigaz and NVIDIA

0.31

Correlation Coefficient

Gaztransport Technigaz  NVIDIA

Weak diversification

The 3 months correlation between Gaztransport and NVIDIA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SA and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Gaztransport Technigaz 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 Gaztransport Technigaz SA 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 Gaztransport Technigaz i.e., Gaztransport Technigaz and NVIDIA go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and NVIDIA

Assuming the 90 days horizon Gaztransport Technigaz is expected to generate 4.92 times less return on investment than NVIDIA. But when comparing it to its historical volatility, Gaztransport Technigaz SA is 1.76 times less risky than NVIDIA. It trades about 0.04 of its potential returns per unit of risk. NVIDIA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,748  in NVIDIA on October 24, 2024 and sell it today you would earn a total of  7,762  from holding NVIDIA or generate 135.04% return on investment over 90 days.

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

Gaztransport Technigaz SA  vs.  NVIDIA

Gaztransport Technigaz

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gaztransport Technigaz reported solid returns over the last few months and may actually be approaching a breakup point.

NVIDIA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, NVIDIA is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gaztransport Technigaz and NVIDIA

The main advantage of trading using opposite Gaztransport Technigaz and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaztransport Technigaz 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.

The idea behind Gaztransport Technigaz SA and NVIDIA 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.