Correlation Between NVIDIA and JPM America

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

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

Diversification Opportunities for NVIDIA and JPM America

0.4

Correlation Coefficient

NVIDIA  JPM America

Very weak diversification

The 3 months correlation between NVIDIA and JPM is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and JPM America Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM America Equity 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 JPM America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM America Equity has no effect on the direction of NVIDIA i.e., NVIDIA and JPM America go up and down completely randomly.

Pair Corralation between NVIDIA and JPM America

Given the investment horizon of 90 days NVIDIA is expected to generate 2.97 times more return on investment than JPM America. However, NVIDIA is 2.97 times more volatile than JPM America Equity. It trades about 0.12 of its potential returns per unit of risk. JPM America Equity is currently generating about 0.09 per unit of risk. If you would invest  4,389  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  9,379  from holding NVIDIA or generate 213.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.82%
Values	Daily Returns

NVIDIA  vs.  JPM America Equity

NVIDIA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

JPM America Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPM America Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, JPM America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NVIDIA and JPM America

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

The idea behind NVIDIA and JPM America Equity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.