Correlation Between NVIDIA and Air Products

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

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

Diversification Opportunities for NVIDIA and Air Products

-0.17

Correlation Coefficient

NVIDIA  Air Products

Good diversification

The 3 months correlation between NVIDIA and Air is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of NVIDIA i.e., NVIDIA and Air Products go up and down completely randomly.

Pair Corralation between NVIDIA and Air Products

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Air Products. In addition to that, NVIDIA is 5.13 times more volatile than Air Products and. It trades about -0.02 of its total potential returns per unit of risk. Air Products and is currently generating about 0.3 per unit of volatility. If you would invest  44,670  in Air Products and on October 22, 2024 and sell it today you would earn a total of  1,230  from holding Air Products and or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

NVIDIA  vs.  Air Products and

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NVIDIA and Air Products

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

The idea behind NVIDIA and Air Products and 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.