Correlation Between NVIDIA and BAG Films

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

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

Diversification Opportunities for NVIDIA and BAG Films

-0.52

Correlation Coefficient

NVIDIA  BAG Films

Excellent diversification

The 3 months correlation between NVIDIA and BAG is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and BAG Films and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAG Films 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 BAG Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAG Films has no effect on the direction of NVIDIA i.e., NVIDIA and BAG Films go up and down completely randomly.

Pair Corralation between NVIDIA and BAG Films

Given the investment horizon of 90 days NVIDIA is expected to generate 0.7 times more return on investment than BAG Films. However, NVIDIA is 1.44 times less risky than BAG Films. It trades about 0.07 of its potential returns per unit of risk. BAG Films and is currently generating about -0.06 per unit of risk. If you would invest  12,771  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  1,060  from holding NVIDIA or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

NVIDIA  vs.  BAG Films and

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) 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.

BAG Films

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAG Films and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NVIDIA and BAG Films

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

The idea behind NVIDIA and BAG Films and 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.