Correlation Between NVIDIA and CITIC

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

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

Diversification Opportunities for NVIDIA and CITIC

0.8

Correlation Coefficient

NVIDIA  CITIC

Very poor diversification

The 3 months correlation between NVIDIA and CITIC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of NVIDIA i.e., NVIDIA and CITIC go up and down completely randomly.

Pair Corralation between NVIDIA and CITIC

Given the investment horizon of 90 days NVIDIA is expected to generate 1.04 times less return on investment than CITIC. In addition to that, NVIDIA is 1.35 times more volatile than CITIC Limited. It trades about 0.06 of its total potential returns per unit of risk. CITIC Limited is currently generating about 0.08 per unit of volatility. If you would invest  88.00  in CITIC Limited on September 1, 2024 and sell it today you would earn a total of  22.00  from holding CITIC Limited or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

NVIDIA  vs.  CITIC Limited

NVIDIA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 13 (%) 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.

CITIC Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and CITIC

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

The idea behind NVIDIA and CITIC Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.