Correlation Between NVIDIA and FF European

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

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

Diversification Opportunities for NVIDIA and FF European

-0.14

Correlation Coefficient

NVIDIA  FF European

Good diversification

The 3 months correlation between NVIDIA and FJ2B is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and FF European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF European 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 FF European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF European has no effect on the direction of NVIDIA i.e., NVIDIA and FF European go up and down completely randomly.

Pair Corralation between NVIDIA and FF European

Given the investment horizon of 90 days NVIDIA is expected to generate 4.36 times more return on investment than FF European. However, NVIDIA is 4.36 times more volatile than FF European. It trades about 0.15 of its potential returns per unit of risk. FF European is currently generating about 0.08 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 Against
Strength	Insignificant
Accuracy	44.74%
Values	Daily Returns

NVIDIA  vs.  FF European

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.

FF European

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days FF European has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, FF European is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and FF European

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

The idea behind NVIDIA and FF European 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.