Correlation Between NVIDIA and InsCorp

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

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

Diversification Opportunities for NVIDIA and InsCorp

0.25

Correlation Coefficient

NVIDIA  InsCorp

Modest diversification

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

Pair Corralation between NVIDIA and InsCorp

Given the investment horizon of 90 days NVIDIA is expected to generate 2.39 times more return on investment than InsCorp. However, NVIDIA is 2.39 times more volatile than InsCorp. It trades about 0.14 of its potential returns per unit of risk. InsCorp is currently generating about 0.07 per unit of risk. If you would invest  5,434  in NVIDIA on October 6, 2024 and sell it today you would earn a total of  9,013  from holding NVIDIA or generate 165.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.66%
Values	Daily Returns

NVIDIA  vs.  InsCorp

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.

InsCorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InsCorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, InsCorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and InsCorp

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

The idea behind NVIDIA and InsCorp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.