Correlation Between Analog Devices, and NVIDIA

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

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

Diversification Opportunities for Analog Devices, and NVIDIA

0.17

Correlation Coefficient

Analog Devices,  NVIDIA

Average diversification

The 3 months correlation between Analog and NVIDIA is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices, and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Analog Devices, 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 Analog Devices, 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 Analog Devices, i.e., Analog Devices, and NVIDIA go up and down completely randomly.

Pair Corralation between Analog Devices, and NVIDIA

Assuming the 90 days trading horizon Analog Devices, is expected to generate 0.52 times more return on investment than NVIDIA. However, Analog Devices, is 1.93 times less risky than NVIDIA. It trades about -0.05 of its potential returns per unit of risk. NVIDIA is currently generating about -0.07 per unit of risk. If you would invest  64,259  in Analog Devices, on December 25, 2024 and sell it today you would lose (4,659) from holding Analog Devices, or give up 7.25% of portfolio value over 90 days.

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

Analog Devices,  vs.  NVIDIA

Analog Devices,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Analog Devices, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Analog Devices, and NVIDIA

The main advantage of trading using opposite Analog Devices, and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices, 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 Analog Devices, 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.