Correlation Between NVIDIA and Business Development

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

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

Diversification Opportunities for NVIDIA and Business Development

0.74

Correlation Coefficient

NVIDIA  Business Development

Poor diversification

The 3 months correlation between NVIDIA and Business is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Business Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business Development Corp 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 Business Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business Development Corp has no effect on the direction of NVIDIA i.e., NVIDIA and Business Development go up and down completely randomly.

Pair Corralation between NVIDIA and Business Development

Given the investment horizon of 90 days NVIDIA is expected to generate 0.55 times more return on investment than Business Development. However, NVIDIA is 1.83 times less risky than Business Development. It trades about 0.16 of its potential returns per unit of risk. Business Development Corp is currently generating about 0.04 per unit of risk. If you would invest  1,460  in NVIDIA on September 20, 2024 and sell it today you would earn a total of  11,879  from holding NVIDIA or generate 813.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

NVIDIA  vs.  Business Development Corp

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 weak fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Business Development Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Business Development Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Business Development is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and Business Development

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

The idea behind NVIDIA and Business Development Corp 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.