Correlation Between NVIDIA and KKRS

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

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

Diversification Opportunities for NVIDIA and KKRS

-0.69

Correlation Coefficient

NVIDIA  KKRS

Excellent diversification

The 3 months correlation between NVIDIA and KKRS is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and KKRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKRS 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 KKRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKRS has no effect on the direction of NVIDIA i.e., NVIDIA and KKRS go up and down completely randomly.

Pair Corralation between NVIDIA and KKRS

Given the investment horizon of 90 days NVIDIA is expected to under-perform the KKRS. In addition to that, NVIDIA is 1.57 times more volatile than KKRS. It trades about -0.27 of its total potential returns per unit of risk. KKRS is currently generating about 0.06 per unit of volatility. If you would invest  1,895  in KKRS on September 20, 2024 and sell it today you would earn a total of  29.00  from holding KKRS or generate 1.53% return on investment over 90 days.

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

NVIDIA  vs.  KKRS

NVIDIA

Risk-Adjusted Performance

7 of 100

Modest

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 weak fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

KKRS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKRS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NVIDIA and KKRS

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

The idea behind NVIDIA and KKRS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.