Correlation Between NVIDIA and American Copper

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

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

Diversification Opportunities for NVIDIA and American Copper

-0.15

Correlation Coefficient

NVIDIA  American Copper

Good diversification

The 3 months correlation between NVIDIA and American is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and American Copper Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Copper Deve 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 American Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Copper Deve has no effect on the direction of NVIDIA i.e., NVIDIA and American Copper go up and down completely randomly.

Pair Corralation between NVIDIA and American Copper

Given the investment horizon of 90 days NVIDIA is expected to generate 0.46 times more return on investment than American Copper. However, NVIDIA is 2.17 times less risky than American Copper. It trades about -0.02 of its potential returns per unit of risk. American Copper Development is currently generating about -0.19 per unit of risk. If you would invest  13,967  in NVIDIA on October 24, 2024 and sell it today you would lose (196.00) from holding NVIDIA or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

NVIDIA  vs.  American Copper Development

NVIDIA

Risk-Adjusted Performance

0 of 100

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.

American Copper Deve

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and American Copper

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

The idea behind NVIDIA and American Copper Development 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.