Correlation Between NVIDIA and Real Estate

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

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

Diversification Opportunities for NVIDIA and Real Estate

0.23

Correlation Coefficient

NVIDIA  Real Estate

Modest diversification

The 3 months correlation between NVIDIA and Real is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of NVIDIA i.e., NVIDIA and Real Estate go up and down completely randomly.

Pair Corralation between NVIDIA and Real Estate

Given the investment horizon of 90 days NVIDIA is expected to generate 2.38 times more return on investment than Real Estate. However, NVIDIA is 2.38 times more volatile than Real Estate Securities. It trades about 0.04 of its potential returns per unit of risk. Real Estate Securities is currently generating about -0.14 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 Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

NVIDIA  vs.  Real Estate Securities

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.

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and Real Estate

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

The idea behind NVIDIA and Real Estate Securities 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.