Correlation Between NVIDIA and Cult Food

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

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

Diversification Opportunities for NVIDIA and Cult Food

0.5

Correlation Coefficient

NVIDIA  Cult Food

Very weak diversification

The 3 months correlation between NVIDIA and Cult is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Cult Food Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cult Food Science 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 Cult Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cult Food Science has no effect on the direction of NVIDIA i.e., NVIDIA and Cult Food go up and down completely randomly.

Pair Corralation between NVIDIA and Cult Food

Given the investment horizon of 90 days NVIDIA is expected to generate 0.63 times more return on investment than Cult Food. However, NVIDIA is 1.58 times less risky than Cult Food. It trades about -0.03 of its potential returns per unit of risk. Cult Food Science is currently generating about -0.05 per unit of risk. If you would invest  13,067  in NVIDIA on December 19, 2024 and sell it today you would lose (1,524) from holding NVIDIA or give up 11.66% of portfolio value over 90 days.

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

NVIDIA  vs.  Cult Food Science

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cult Food Science

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cult Food Science has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and Cult Food

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

The idea behind NVIDIA and Cult Food Science 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..