Correlation Between NVIDIA and DOLFINES

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

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

Diversification Opportunities for NVIDIA and DOLFINES

0.19

Correlation Coefficient

NVIDIA  DOLFINES

Average diversification

The 3 months correlation between NVIDIA and DOLFINES is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and DOLFINES SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLFINES SA EO 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 DOLFINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLFINES SA EO has no effect on the direction of NVIDIA i.e., NVIDIA and DOLFINES go up and down completely randomly.

Pair Corralation between NVIDIA and DOLFINES

Given the investment horizon of 90 days NVIDIA is expected to generate 50.16 times less return on investment than DOLFINES. But when comparing it to its historical volatility, NVIDIA is 28.55 times less risky than DOLFINES. It trades about 0.1 of its potential returns per unit of risk. DOLFINES SA EO is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  50.00  in DOLFINES SA EO on October 6, 2024 and sell it today you would earn a total of  85.00  from holding DOLFINES SA EO or generate 170.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

NVIDIA  vs.  DOLFINES SA EO

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.

DOLFINES SA EO

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days DOLFINES SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, DOLFINES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and DOLFINES

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

The idea behind NVIDIA and DOLFINES SA EO 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 Transaction History module to view history of all your transactions and understand their impact on performance.