Correlation Between NVIDIA and SIERRA MADRE

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

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

Diversification Opportunities for NVIDIA and SIERRA MADRE

0.13

Correlation Coefficient

NVIDIA  SIERRA MADRE

Average diversification

The 3 months correlation between NVIDIA and SIERRA is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and SIERRA MADRE GOLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA MADRE GOLD and NVIDIA 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 NVIDIA are associated (or correlated) with SIERRA MADRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA MADRE GOLD has no effect on the direction of NVIDIA i.e., NVIDIA and SIERRA MADRE go up and down completely randomly.

Pair Corralation between NVIDIA and SIERRA MADRE

Assuming the 90 days trading horizon NVIDIA is expected to under-perform the SIERRA MADRE. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 1.97 times less risky than SIERRA MADRE. The stock trades about -0.06 of its potential returns per unit of risk. The SIERRA MADRE GOLD is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  35.00  in SIERRA MADRE GOLD on December 22, 2024 and sell it today you would earn a total of  3.00  from holding SIERRA MADRE GOLD or generate 8.57% return on investment over 90 days.

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

NVIDIA  vs.  SIERRA MADRE GOLD

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

SIERRA MADRE GOLD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA MADRE GOLD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIERRA MADRE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and SIERRA MADRE

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

The idea behind NVIDIA and SIERRA MADRE GOLD 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.