Correlation Between AstraZeneca PLC and NVIDIA Corp

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

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

Diversification Opportunities for AstraZeneca PLC and NVIDIA Corp

-0.66

Correlation Coefficient

AstraZeneca PLC  NVIDIA Corp

Excellent diversification

The 3 months correlation between AstraZeneca and NVIDIA is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and NVIDIA Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA Corp and AstraZeneca PLC 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 AstraZeneca PLC are associated (or correlated) with NVIDIA Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA Corp has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and NVIDIA Corp go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and NVIDIA Corp

Assuming the 90 days trading horizon AstraZeneca PLC is expected to under-perform the NVIDIA Corp. But the stock apears to be less risky and, when comparing its historical volatility, AstraZeneca PLC is 1.45 times less risky than NVIDIA Corp. The stock trades about -0.12 of its potential returns per unit of risk. The NVIDIA Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,675  in NVIDIA Corp on September 15, 2024 and sell it today you would earn a total of  1,584  from holding NVIDIA Corp or generate 13.57% return on investment over 90 days.

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

AstraZeneca PLC  vs.  NVIDIA Corp

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NVIDIA Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA Corp are ranked lower than 7 (%) 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.

Pair Trading with AstraZeneca PLC and NVIDIA Corp

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

The idea behind AstraZeneca PLC and NVIDIA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.