Correlation Between NVIDIA and Innovator Premium

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

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

Diversification Opportunities for NVIDIA and Innovator Premium

0.43

Correlation Coefficient

NVIDIA  Innovator Premium

Very weak diversification

The 3 months correlation between NVIDIA and Innovator is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Innovator Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Premium Income 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 Innovator Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Premium Income has no effect on the direction of NVIDIA i.e., NVIDIA and Innovator Premium go up and down completely randomly.

Pair Corralation between NVIDIA and Innovator Premium

Given the investment horizon of 90 days NVIDIA is expected to generate 18.9 times more return on investment than Innovator Premium. However, NVIDIA is 18.9 times more volatile than Innovator Premium Income. It trades about 0.15 of its potential returns per unit of risk. Innovator Premium Income is currently generating about 0.13 per unit of risk. If you would invest  1,689  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  11,740  from holding NVIDIA or generate 695.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.11%
Values	Daily Returns

NVIDIA  vs.  Innovator Premium Income

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.

Innovator Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Innovator Premium is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with NVIDIA and Innovator Premium

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

The idea behind NVIDIA and Innovator Premium Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.