Correlation Between NVIDIA and Gourmet Provisions

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

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

Diversification Opportunities for NVIDIA and Gourmet Provisions

0.07

Correlation Coefficient

NVIDIA  Gourmet Provisions

Significant diversification

The 3 months correlation between NVIDIA and Gourmet is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Gourmet Provisions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Provisions 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 Gourmet Provisions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gourmet Provisions has no effect on the direction of NVIDIA i.e., NVIDIA and Gourmet Provisions go up and down completely randomly.

Pair Corralation between NVIDIA and Gourmet Provisions

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Gourmet Provisions. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 43.11 times less risky than Gourmet Provisions. The stock trades about -0.07 of its potential returns per unit of risk. The Gourmet Provisions International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Gourmet Provisions International on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Gourmet Provisions International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

NVIDIA  vs.  Gourmet Provisions Internation

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 unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gourmet Provisions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gourmet Provisions International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gourmet Provisions reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Gourmet Provisions

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

The idea behind NVIDIA and Gourmet Provisions International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.