Correlation Between NVIDIA and Insumos Agroquimicos

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

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

Diversification Opportunities for NVIDIA and Insumos Agroquimicos

0.61

Correlation Coefficient

NVIDIA  Insumos Agroquimicos

Poor diversification

The 3 months correlation between NVIDIA and Insumos is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Insumos Agroquimicos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insumos Agroquimicos 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 Insumos Agroquimicos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insumos Agroquimicos has no effect on the direction of NVIDIA i.e., NVIDIA and Insumos Agroquimicos go up and down completely randomly.

Pair Corralation between NVIDIA and Insumos Agroquimicos

Assuming the 90 days trading horizon NVIDIA is expected to generate 4070.0 times less return on investment than Insumos Agroquimicos. But when comparing it to its historical volatility, NVIDIA is 46.6 times less risky than Insumos Agroquimicos. It trades about 0.0 of its potential returns per unit of risk. Insumos Agroquimicos SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  27,000  in Insumos Agroquimicos SA on September 1, 2024 and sell it today you would earn a total of  273,000  from holding Insumos Agroquimicos SA or generate 1011.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

NVIDIA  vs.  Insumos Agroquimicos SA

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NVIDIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Insumos Agroquimicos

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insumos Agroquimicos SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Insumos Agroquimicos sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Insumos Agroquimicos

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

The idea behind NVIDIA and Insumos Agroquimicos SA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.