Correlation Between NVIDIA and Arlington Asset

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

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

Diversification Opportunities for NVIDIA and Arlington Asset

0.21

Correlation Coefficient

NVIDIA  Arlington Asset

Modest diversification

The 3 months correlation between NVIDIA and Arlington is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Arlington Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlington Asset Inve 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 Arlington Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlington Asset Inve has no effect on the direction of NVIDIA i.e., NVIDIA and Arlington Asset go up and down completely randomly.

Pair Corralation between NVIDIA and Arlington Asset

If you would invest  12,771  in NVIDIA on October 6, 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 Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.61%
Values	Daily Returns

NVIDIA  vs.  Arlington Asset Investment

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.

Arlington Asset Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arlington Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Arlington Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and Arlington Asset

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

The idea behind NVIDIA and Arlington Asset Investment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.