Correlation Between NVIDIA and Bath Body

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

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

Diversification Opportunities for NVIDIA and Bath Body

-0.01

Correlation Coefficient

NVIDIA  Bath Body

Good diversification

The 3 months correlation between NVIDIA and Bath is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of NVIDIA i.e., NVIDIA and Bath Body go up and down completely randomly.

Pair Corralation between NVIDIA and Bath Body

Given the investment horizon of 90 days NVIDIA is expected to generate 1.17 times more return on investment than Bath Body. However, NVIDIA is 1.17 times more volatile than Bath Body Works. It trades about 0.14 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.01 per unit of risk. If you would invest  4,661  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  9,170  from holding NVIDIA or generate 196.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

NVIDIA  vs.  Bath Body Works

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bath Body Works

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bath Body Works are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bath Body unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Bath Body

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

The idea behind NVIDIA and Bath Body Works 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.