Correlation Between NVIDIA and LS 1x

Can any of the company-specific risk be diversified away by investing in both NVIDIA and LS 1x 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 LS 1x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NVIDIA and LS 1x Tesla, you can compare the effects of market volatilities on NVIDIA and LS 1x 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 LS 1x. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and LS 1x.

Diversification Opportunities for NVIDIA and LS 1x

0.07

Correlation Coefficient

NVIDIA  LS 1x

Significant diversification

The 3 months correlation between NVIDIA and 1TSL is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and LS 1x Tesla in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS 1x Tesla 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 LS 1x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS 1x Tesla has no effect on the direction of NVIDIA i.e., NVIDIA and LS 1x go up and down completely randomly.

Pair Corralation between NVIDIA and LS 1x

Given the investment horizon of 90 days NVIDIA is expected to generate 10.89 times less return on investment than LS 1x. But when comparing it to its historical volatility, NVIDIA is 2.14 times less risky than LS 1x. It trades about 0.04 of its potential returns per unit of risk. LS 1x Tesla is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  620.00  in LS 1x Tesla on October 6, 2024 and sell it today you would earn a total of  321.00  from holding LS 1x Tesla or generate 51.77% return on investment over 90 days.

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

NVIDIA  vs.  LS 1x Tesla

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

LS 1x Tesla

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Tesla are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and LS 1x

The main advantage of trading using opposite NVIDIA and LS 1x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, LS 1x 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 LS 1x will offset losses from the drop in LS 1x's long position.

The idea behind NVIDIA and LS 1x Tesla 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.