Correlation Between NVIDIA and Insurance Australia

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

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

Diversification Opportunities for NVIDIA and Insurance Australia

0.24

Correlation Coefficient

NVIDIA  Insurance Australia

Modest diversification

The 3 months correlation between NVIDIA and Insurance is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia 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 Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of NVIDIA i.e., NVIDIA and Insurance Australia go up and down completely randomly.

Pair Corralation between NVIDIA and Insurance Australia

Given the investment horizon of 90 days NVIDIA is expected to generate 2.52 times more return on investment than Insurance Australia. However, NVIDIA is 2.52 times more volatile than Insurance Australia Group. It trades about 0.14 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.11 per unit of risk. If you would invest  2,177  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  11,654  from holding NVIDIA or generate 535.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.37%
Values	Daily Returns

NVIDIA  vs.  Insurance Australia Group

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.

Insurance Australia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Insurance Australia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Insurance Australia

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

The idea behind NVIDIA and Insurance Australia Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.