Correlation Between NVIDIA and Altech Batteries

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

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

Diversification Opportunities for NVIDIA and Altech Batteries

0.18

Correlation Coefficient

NVIDIA  Altech Batteries

Average diversification

The 3 months correlation between NVIDIA and Altech is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Altech Batteries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altech Batteries 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 Altech Batteries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altech Batteries has no effect on the direction of NVIDIA i.e., NVIDIA and Altech Batteries go up and down completely randomly.

Pair Corralation between NVIDIA and Altech Batteries

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Altech Batteries. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 3.05 times less risky than Altech Batteries. The stock trades about -0.01 of its potential returns per unit of risk. The Altech Batteries Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.18  in Altech Batteries Limited on November 28, 2024 and sell it today you would lose (0.26) from holding Altech Batteries Limited or give up 8.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

NVIDIA  vs.  Altech Batteries Limited

NVIDIA

Risk-Adjusted Performance

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.

Altech Batteries

Risk-Adjusted Performance

Weak

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

Pair Trading with NVIDIA and Altech Batteries

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

The idea behind NVIDIA and Altech Batteries Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.