Correlation Between NVIDIA and Highland Funds

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

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

Diversification Opportunities for NVIDIA and Highland Funds

-0.25

Correlation Coefficient

NVIDIA  Highland Funds

Very good diversification

The 3 months correlation between NVIDIA and Highland is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Highland Funds I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Funds I 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 Highland Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Funds I has no effect on the direction of NVIDIA i.e., NVIDIA and Highland Funds go up and down completely randomly.

Pair Corralation between NVIDIA and Highland Funds

Given the investment horizon of 90 days NVIDIA is expected to generate 3.52 times more return on investment than Highland Funds. However, NVIDIA is 3.52 times more volatile than Highland Funds I. It trades about 0.15 of its potential returns per unit of risk. Highland Funds I is currently generating about 0.0 per unit of risk. If you would invest  1,460  in NVIDIA on September 20, 2024 and sell it today you would earn a total of  11,608  from holding NVIDIA or generate 795.07% return on investment over 90 days.

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

NVIDIA  vs.  Highland Funds I

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Highland Funds I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Funds I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NVIDIA and Highland Funds

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

The idea behind NVIDIA and Highland Funds I 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.