Correlation Between NVIDIA and IShares Corp

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

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

Diversification Opportunities for NVIDIA and IShares Corp

-0.03

Correlation Coefficient

NVIDIA  IShares Corp

Good diversification

The 3 months correlation between NVIDIA and IShares is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and iShares Corp Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Corp Bond 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 IShares Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Corp Bond has no effect on the direction of NVIDIA i.e., NVIDIA and IShares Corp go up and down completely randomly.

Pair Corralation between NVIDIA and IShares Corp

Given the investment horizon of 90 days NVIDIA is expected to generate 17.59 times more return on investment than IShares Corp. However, NVIDIA is 17.59 times more volatile than iShares Corp Bond. It trades about 0.04 of its potential returns per unit of risk. iShares Corp Bond is currently generating about 0.28 per unit of risk. If you would invest  13,990  in NVIDIA on October 6, 2024 and sell it today you would earn a total of  457.00  from holding NVIDIA or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.68%
Values	Daily Returns

NVIDIA  vs.  iShares Corp Bond

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.

iShares Corp Bond

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days iShares Corp Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NVIDIA and IShares Corp

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

The idea behind NVIDIA and iShares Corp Bond 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.