Correlation Between NVIDIA and Taiwan FamilyMart

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

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

Diversification Opportunities for NVIDIA and Taiwan FamilyMart

0.4

Correlation Coefficient

NVIDIA  Taiwan FamilyMart

Very weak diversification

The 3 months correlation between NVIDIA and Taiwan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Taiwan FamilyMart Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan FamilyMart 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 Taiwan FamilyMart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan FamilyMart has no effect on the direction of NVIDIA i.e., NVIDIA and Taiwan FamilyMart go up and down completely randomly.

Pair Corralation between NVIDIA and Taiwan FamilyMart

Given the investment horizon of 90 days NVIDIA is expected to generate 5.38 times more return on investment than Taiwan FamilyMart. However, NVIDIA is 5.38 times more volatile than Taiwan FamilyMart Co. It trades about 0.04 of its potential returns per unit of risk. Taiwan FamilyMart Co is currently generating about -0.17 per unit of risk. If you would invest  13,990  in NVIDIA on October 6, 2024 and sell it today you would earn a total of  457.00  from holding NVIDIA or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.35%
Values	Daily Returns

NVIDIA  vs.  Taiwan FamilyMart Co

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.

Taiwan FamilyMart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan FamilyMart Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan FamilyMart is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NVIDIA and Taiwan FamilyMart

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

The idea behind NVIDIA and Taiwan FamilyMart Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.