Correlation Between NVIDIA and Key Energy

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

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

Diversification Opportunities for NVIDIA and Key Energy

0.07

Correlation Coefficient

NVIDIA  Key Energy

Significant diversification

The 3 months correlation between NVIDIA and Key is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Key Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Key Energy Services 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 Key Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Key Energy Services has no effect on the direction of NVIDIA i.e., NVIDIA and Key Energy go up and down completely randomly.

Pair Corralation between NVIDIA and Key Energy

If you would invest  10.00  in Key Energy Services on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Key Energy Services or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

NVIDIA  vs.  Key Energy Services

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) 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.

Key Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Key Energy 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 Key Energy

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

The idea behind NVIDIA and Key Energy Services 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.