Correlation Between NVIDIA and Federated Municipal

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

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

Diversification Opportunities for NVIDIA and Federated Municipal

-0.12

Correlation Coefficient

NVIDIA  Federated Municipal

Good diversification

The 3 months correlation between NVIDIA and Federated is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Federated Municipal Ultrashort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Municipal 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 Federated Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Municipal has no effect on the direction of NVIDIA i.e., NVIDIA and Federated Municipal go up and down completely randomly.

Pair Corralation between NVIDIA and Federated Municipal

Given the investment horizon of 90 days NVIDIA is expected to generate 45.6 times more return on investment than Federated Municipal. However, NVIDIA is 45.6 times more volatile than Federated Municipal Ultrashort. It trades about 0.15 of its potential returns per unit of risk. Federated Municipal Ultrashort is currently generating about 0.2 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	100.0%
Values	Daily Returns

NVIDIA  vs.  Federated Municipal Ultrashort

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.

Federated Municipal

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Municipal Ultrashort are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Municipal 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 Federated Municipal

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

The idea behind NVIDIA and Federated Municipal Ultrashort 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.