Correlation Between Marvell Technology and NVIDIA

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

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

Diversification Opportunities for Marvell Technology and NVIDIA

0.73

Correlation Coefficient

Marvell Technology  NVIDIA

Poor diversification

The 3 months correlation between Marvell and NVIDIA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Marvell Technology 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 Marvell Technology 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 Marvell Technology i.e., Marvell Technology and NVIDIA go up and down completely randomly.

Pair Corralation between Marvell Technology and NVIDIA

Assuming the 90 days trading horizon Marvell Technology is expected to generate 1.83 times more return on investment than NVIDIA. However, Marvell Technology is 1.83 times more volatile than NVIDIA. It trades about 0.23 of its potential returns per unit of risk. NVIDIA is currently generating about 0.18 per unit of risk. If you would invest  3,994  in Marvell Technology on September 26, 2024 and sell it today you would earn a total of  3,083  from holding Marvell Technology or generate 77.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Marvell Technology  vs.  NVIDIA

Marvell Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marvell Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Marvell Technology and NVIDIA

The main advantage of trading using opposite Marvell Technology and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marvell Technology 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 Marvell Technology 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.