Correlation Between NVIDIA and Inter Parfums

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

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

Diversification Opportunities for NVIDIA and Inter Parfums

-0.12

Correlation Coefficient

NVIDIA  Inter Parfums

Good diversification

The 3 months correlation between NVIDIA and Inter is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of NVIDIA i.e., NVIDIA and Inter Parfums go up and down completely randomly.

Pair Corralation between NVIDIA and Inter Parfums

Given the investment horizon of 90 days NVIDIA is expected to generate 1.49 times more return on investment than Inter Parfums. However, NVIDIA is 1.49 times more volatile than Inter Parfums. It trades about 0.14 of its potential returns per unit of risk. Inter Parfums is currently generating about 0.03 per unit of risk. If you would invest  1,915  in NVIDIA on October 21, 2024 and sell it today you would earn a total of  11,856  from holding NVIDIA or generate 619.11% return on investment over 90 days.

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

NVIDIA  vs.  Inter Parfums

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Inter Parfums

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Inter Parfums reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Inter Parfums

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

The idea behind NVIDIA and Inter Parfums 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.