Correlation Between NVIDIA and GPT

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

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

Diversification Opportunities for NVIDIA and GPT

-0.31

Correlation Coefficient

NVIDIA  GPT

Very good diversification

The 3 months correlation between NVIDIA and GPT is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and GPT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Group 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 GPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Group has no effect on the direction of NVIDIA i.e., NVIDIA and GPT go up and down completely randomly.

Pair Corralation between NVIDIA and GPT

Given the investment horizon of 90 days NVIDIA is expected to generate 1.18 times less return on investment than GPT. In addition to that, NVIDIA is 1.14 times more volatile than GPT Group. It trades about 0.03 of its total potential returns per unit of risk. GPT Group is currently generating about 0.04 per unit of volatility. If you would invest  232.00  in GPT Group on October 4, 2024 and sell it today you would earn a total of  27.00  from holding GPT Group or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NVIDIA  vs.  GPT Group

NVIDIA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 4 (%) 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.

GPT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 GPT

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

The idea behind NVIDIA and GPT Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.