Correlation Between NVIDIA and Shenzhen United

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Can any of the company-specific risk be diversified away by investing in both NVIDIA and Shenzhen United 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 Shenzhen United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Shenzhen United Winners, you can compare the effects of market volatilities on NVIDIA and Shenzhen United 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 Shenzhen United. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Shenzhen United.

Diversification Opportunities for NVIDIA and Shenzhen United

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between NVIDIA and Shenzhen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Shenzhen United Winners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen United Winners 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 Shenzhen United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen United Winners has no effect on the direction of NVIDIA i.e., NVIDIA and Shenzhen United go up and down completely randomly.

Pair Corralation between NVIDIA and Shenzhen United

Given the investment horizon of 90 days NVIDIA is expected to generate 0.52 times more return on investment than Shenzhen United. However, NVIDIA is 1.94 times less risky than Shenzhen United. It trades about 0.1 of its potential returns per unit of risk. Shenzhen United Winners is currently generating about -0.02 per unit of risk. If you would invest  12,771  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  1,676  from holding NVIDIA or generate 13.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.41%
ValuesDaily Returns

NVIDIA  vs.  Shenzhen United Winners

 Performance 
       Timeline  
NVIDIA 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
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.
Shenzhen United Winners 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shenzhen United Winners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen United is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NVIDIA and Shenzhen United Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NVIDIA and Shenzhen United

The main advantage of trading using opposite NVIDIA and Shenzhen United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Shenzhen United 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 Shenzhen United will offset losses from the drop in Shenzhen United's long position.
The idea behind NVIDIA and Shenzhen United Winners 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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