Correlation Between NVIDIA and Amkor Technology

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

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

Diversification Opportunities for NVIDIA and Amkor Technology

-0.3

Correlation Coefficient

NVIDIA  Amkor Technology

Very good diversification

The 3 months correlation between NVIDIA and Amkor is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Amkor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amkor Technology 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 Amkor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amkor Technology has no effect on the direction of NVIDIA i.e., NVIDIA and Amkor Technology go up and down completely randomly.

Pair Corralation between NVIDIA and Amkor Technology

Assuming the 90 days trading horizon NVIDIA is expected to generate 0.98 times more return on investment than Amkor Technology. However, NVIDIA is 1.02 times less risky than Amkor Technology. It trades about 0.13 of its potential returns per unit of risk. Amkor Technology is currently generating about -0.05 per unit of risk. If you would invest  11,747  in NVIDIA on October 7, 2024 and sell it today you would earn a total of  2,185  from holding NVIDIA or generate 18.6% return on investment over 90 days.

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

NVIDIA  vs.  Amkor Technology

NVIDIA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 10 (%) 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.

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NVIDIA and Amkor Technology

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

The idea behind NVIDIA and Amkor Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.