Correlation Between NVIDIA and Inspire SmallMid

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

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

Diversification Opportunities for NVIDIA and Inspire SmallMid

0.39

Correlation Coefficient

NVIDIA  Inspire SmallMid

Weak diversification

The 3 months correlation between NVIDIA and Inspire is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Inspire SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire SmallMid Cap 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 Inspire SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire SmallMid Cap has no effect on the direction of NVIDIA i.e., NVIDIA and Inspire SmallMid go up and down completely randomly.

Pair Corralation between NVIDIA and Inspire SmallMid

Given the investment horizon of 90 days NVIDIA is expected to generate 1.97 times more return on investment than Inspire SmallMid. However, NVIDIA is 1.97 times more volatile than Inspire SmallMid Cap. It trades about 0.0 of its potential returns per unit of risk. Inspire SmallMid Cap is currently generating about -0.26 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (66.00) from holding NVIDIA or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NVIDIA  vs.  Inspire SmallMid Cap

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.

Inspire SmallMid Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire SmallMid Cap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Inspire SmallMid is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and Inspire SmallMid

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

The idea behind NVIDIA and Inspire SmallMid Cap 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.