Correlation Between NVIDIA and Destinations Multi

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

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

Diversification Opportunities for NVIDIA and Destinations Multi

0.36

Correlation Coefficient

NVIDIA  Destinations Multi

Weak diversification

The 3 months correlation between NVIDIA and Destinations is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Destinations Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Multi 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 Destinations Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Multi has no effect on the direction of NVIDIA i.e., NVIDIA and Destinations Multi go up and down completely randomly.

Pair Corralation between NVIDIA and Destinations Multi

Given the investment horizon of 90 days NVIDIA is expected to generate 14.24 times more return on investment than Destinations Multi. However, NVIDIA is 14.24 times more volatile than Destinations Multi Strategy. It trades about 0.15 of its potential returns per unit of risk. Destinations Multi Strategy is currently generating about 0.12 per unit of risk. If you would invest  1,769  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  12,062  from holding NVIDIA or generate 681.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

NVIDIA  vs.  Destinations Multi Strategy

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Destinations Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Multi Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Destinations Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and Destinations Multi

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

The idea behind NVIDIA and Destinations Multi Strategy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.