Correlation Between NVIDIA and Chevron

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

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

Diversification Opportunities for NVIDIA and Chevron

0.44

Correlation Coefficient

NVIDIA  Chevron

Very weak diversification

The 3 months correlation between NVIDIA and Chevron is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of NVIDIA i.e., NVIDIA and Chevron go up and down completely randomly.

Pair Corralation between NVIDIA and Chevron

Given the investment horizon of 90 days NVIDIA is expected to generate 1.32 times more return on investment than Chevron. However, NVIDIA is 1.32 times more volatile than Chevron. It trades about 0.0 of its potential returns per unit of risk. Chevron is currently generating about -0.17 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (61.00) from holding NVIDIA or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

NVIDIA  vs.  Chevron

NVIDIA

Risk-Adjusted Performance

7 of 100

Modest

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

Chevron

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Chevron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chevron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVIDIA and Chevron

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

The idea behind NVIDIA and Chevron 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.