Correlation Between Financiera Independencia and NVIDIA

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

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

Diversification Opportunities for Financiera Independencia and NVIDIA

-0.7

Correlation Coefficient

Financiera Independencia  NVIDIA

Excellent diversification

The 3 months correlation between Financiera and NVIDIA is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Financiera Independencia SAB and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Financiera Independencia 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 Financiera Independencia SAB 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 Financiera Independencia i.e., Financiera Independencia and NVIDIA go up and down completely randomly.

Pair Corralation between Financiera Independencia and NVIDIA

Assuming the 90 days trading horizon Financiera Independencia SAB is expected to under-perform the NVIDIA. But the stock apears to be less risky and, when comparing its historical volatility, Financiera Independencia SAB is 1.69 times less risky than NVIDIA. The stock trades about -0.13 of its potential returns per unit of risk. The NVIDIA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  220,551  in NVIDIA on September 14, 2024 and sell it today you would earn a total of  59,360  from holding NVIDIA or generate 26.91% return on investment over 90 days.

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

Financiera Independencia SAB  vs.  NVIDIA

Financiera Independencia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financiera Independencia SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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

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. In spite of fairly weak basic indicators, NVIDIA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financiera Independencia and NVIDIA

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.