Correlation Between NVIDIA and International Business

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

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

Diversification Opportunities for NVIDIA and International Business

-0.4

Correlation Coefficient

NVIDIA  International Business

Very good diversification

The 3 months correlation between NVIDIA and International is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of NVIDIA i.e., NVIDIA and International Business go up and down completely randomly.

Pair Corralation between NVIDIA and International Business

Given the investment horizon of 90 days NVIDIA is expected to generate 2.48 times more return on investment than International Business. However, NVIDIA is 2.48 times more volatile than International Business Machines. It trades about 0.15 of its potential returns per unit of risk. International Business Machines is currently generating about 0.09 per unit of risk. If you would invest  1,689  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  12,142  from holding NVIDIA or generate 718.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

NVIDIA  vs.  International Business Machine

NVIDIA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) 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.

International Business

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, International Business is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and International Business

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

The idea behind NVIDIA and International Business Machines 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 Commodity Directory module to find actively traded commodities issued by global exchanges.