Correlation Between Beyond Meat and NVIDIA

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

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

Diversification Opportunities for Beyond Meat and NVIDIA

-0.56

Correlation Coefficient

Beyond Meat  NVIDIA

Excellent diversification

The 3 months correlation between Beyond and NVIDIA is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Beyond Meat and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Beyond Meat 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 Beyond Meat 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 Beyond Meat i.e., Beyond Meat and NVIDIA go up and down completely randomly.

Pair Corralation between Beyond Meat and NVIDIA

Assuming the 90 days trading horizon Beyond Meat is expected to under-perform the NVIDIA. In addition to that, Beyond Meat is 1.49 times more volatile than NVIDIA. It trades about -0.26 of its total potential returns per unit of risk. NVIDIA is currently generating about 0.18 per unit of volatility. If you would invest  1,401  in NVIDIA on September 26, 2024 and sell it today you would earn a total of  394.00  from holding NVIDIA or generate 28.12% return on investment over 90 days.

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

Beyond Meat  vs.  NVIDIA

Beyond Meat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beyond Meat 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NVIDIA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beyond Meat and NVIDIA

The main advantage of trading using opposite Beyond Meat and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beyond Meat 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 Beyond Meat 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..