Correlation Between NVIDIA and BrainChip Holdings

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

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

Diversification Opportunities for NVIDIA and BrainChip Holdings

0.61

Correlation Coefficient

NVIDIA  BrainChip Holdings

Poor diversification

The 3 months correlation between NVIDIA and BrainChip is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and BrainChip Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrainChip Holdings 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 BrainChip Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrainChip Holdings has no effect on the direction of NVIDIA i.e., NVIDIA and BrainChip Holdings go up and down completely randomly.

Pair Corralation between NVIDIA and BrainChip Holdings

Given the investment horizon of 90 days NVIDIA is expected to generate 6.54 times less return on investment than BrainChip Holdings. But when comparing it to its historical volatility, NVIDIA is 2.58 times less risky than BrainChip Holdings. It trades about 0.02 of its potential returns per unit of risk. BrainChip Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in BrainChip Holdings on September 19, 2024 and sell it today you would earn a total of  3.00  from holding BrainChip Holdings or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NVIDIA  vs.  BrainChip Holdings

NVIDIA

Risk-Adjusted Performance

6 of 100

OK

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 weak fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BrainChip Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrainChip Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, BrainChip Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and BrainChip Holdings

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

The idea behind NVIDIA and BrainChip Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.