Correlation Between NVIDIA and Air Liquide

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

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

Diversification Opportunities for NVIDIA and Air Liquide

-0.38

Correlation Coefficient

NVIDIA  Air Liquide

Very good diversification

The 3 months correlation between NVIDIA and Air is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA 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 Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of NVIDIA i.e., NVIDIA and Air Liquide go up and down completely randomly.

Pair Corralation between NVIDIA and Air Liquide

Given the investment horizon of 90 days NVIDIA is expected to generate 3.46 times more return on investment than Air Liquide. However, NVIDIA is 3.46 times more volatile than Air Liquide SA. It trades about -0.02 of its potential returns per unit of risk. Air Liquide SA is currently generating about -0.29 per unit of risk. If you would invest  14,025  in NVIDIA on October 4, 2024 and sell it today you would lose (194.00) from holding NVIDIA or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.82%
Values	Daily Returns

NVIDIA  vs.  Air Liquide SA

NVIDIA

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NVIDIA and Air Liquide

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

The idea behind NVIDIA and Air Liquide SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.