Correlation Between NVIDIA and Fastly

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

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

Diversification Opportunities for NVIDIA and Fastly

-0.11

Correlation Coefficient

NVIDIA  Fastly

Good diversification

The 3 months correlation between NVIDIA and Fastly is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Fastly Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastly Inc 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 Fastly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastly Inc has no effect on the direction of NVIDIA i.e., NVIDIA and Fastly go up and down completely randomly.

Pair Corralation between NVIDIA and Fastly

Given the investment horizon of 90 days NVIDIA is expected to generate 0.7 times more return on investment than Fastly. However, NVIDIA is 1.44 times less risky than Fastly. It trades about 0.15 of its potential returns per unit of risk. Fastly Inc is currently generating about 0.02 per unit of risk. If you would invest  1,769  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  12,062  from holding NVIDIA or generate 681.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

NVIDIA  vs.  Fastly Inc

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.

Fastly Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Fastly Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Fastly unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Fastly

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

The idea behind NVIDIA and Fastly Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.