Correlation Between NVIDIA and Ampol

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

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

Diversification Opportunities for NVIDIA and Ampol

-0.33

Correlation Coefficient

NVIDIA  Ampol

Very good diversification

The 3 months correlation between NVIDIA and Ampol is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Ampol Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol Ltd ADR 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 Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol Ltd ADR has no effect on the direction of NVIDIA i.e., NVIDIA and Ampol go up and down completely randomly.

Pair Corralation between NVIDIA and Ampol

Given the investment horizon of 90 days NVIDIA is expected to generate 1.46 times more return on investment than Ampol. However, NVIDIA is 1.46 times more volatile than Ampol Ltd ADR. It trades about 0.04 of its potential returns per unit of risk. Ampol Ltd ADR is currently generating about 0.02 per unit of risk. If you would invest  14,244  in NVIDIA on October 7, 2024 and sell it today you would earn a total of  203.00  from holding NVIDIA or generate 1.43% return on investment over 90 days.

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

NVIDIA  vs.  Ampol Ltd ADR

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

Ampol Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NVIDIA and Ampol

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

The idea behind NVIDIA and Ampol Ltd ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.