Correlation Between ASE Industrial and NVIDIA

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

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

Diversification Opportunities for ASE Industrial and NVIDIA

0.79

Correlation Coefficient

ASE Industrial  NVIDIA

Poor diversification

The 3 months correlation between ASE and NVIDIA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and ASE Industrial 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and NVIDIA go up and down completely randomly.

Pair Corralation between ASE Industrial and NVIDIA

Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.64 times more return on investment than NVIDIA. However, ASE Industrial Holding is 1.57 times less risky than NVIDIA. It trades about -0.04 of its potential returns per unit of risk. NVIDIA is currently generating about -0.05 per unit of risk. If you would invest  1,034  in ASE Industrial Holding on December 27, 2024 and sell it today you would lose (84.00) from holding ASE Industrial Holding or give up 8.12% of portfolio value over 90 days.

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

ASE Industrial Holding  vs.  NVIDIA

ASE Industrial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic 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 unsteady 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 ASE Industrial and NVIDIA

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