Correlation Between NVIDIA and Swan Hedged

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

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

Diversification Opportunities for NVIDIA and Swan Hedged

0.47

Correlation Coefficient

NVIDIA  Swan Hedged

Very weak diversification

The 3 months correlation between NVIDIA and Swan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Swan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Hedged Equity 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 Swan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Hedged Equity has no effect on the direction of NVIDIA i.e., NVIDIA and Swan Hedged go up and down completely randomly.

Pair Corralation between NVIDIA and Swan Hedged

Given the investment horizon of 90 days NVIDIA is expected to generate 5.71 times more return on investment than Swan Hedged. However, NVIDIA is 5.71 times more volatile than Swan Hedged Equity. It trades about 0.03 of its potential returns per unit of risk. Swan Hedged Equity is currently generating about 0.05 per unit of risk. If you would invest  12,818  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  950.00  from holding NVIDIA or generate 7.41% return on investment over 90 days.

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

NVIDIA  vs.  Swan Hedged Equity

NVIDIA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 4 (%) 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.

Swan Hedged Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Hedged Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Swan Hedged is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and Swan Hedged

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

The idea behind NVIDIA and Swan Hedged Equity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.