Correlation Between Intel and NVIDIA

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

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

Diversification Opportunities for Intel and NVIDIA

0.87

Correlation Coefficient

Intel  NVIDIA

Very poor diversification

The 3 months correlation between Intel and NVIDIA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Intel and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Intel 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 Intel 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 Intel i.e., Intel and NVIDIA go up and down completely randomly.

Pair Corralation between Intel and NVIDIA

Assuming the 90 days horizon Intel is expected to generate 1.36 times less return on investment than NVIDIA. In addition to that, Intel is 1.01 times more volatile than NVIDIA. It trades about 0.09 of its total potential returns per unit of risk. NVIDIA is currently generating about 0.12 per unit of volatility. If you would invest  10,765  in NVIDIA on September 2, 2024 and sell it today you would earn a total of  2,341  from holding NVIDIA or generate 21.75% return on investment over 90 days.

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

Intel  vs.  NVIDIA

Intel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Intel reported solid returns over the last few months and may actually be approaching a breakup point.

NVIDIA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, NVIDIA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intel and NVIDIA

The main advantage of trading using opposite Intel and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.