Correlation Between NVIDIA and Leef Brands

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

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

Diversification Opportunities for NVIDIA and Leef Brands

0.48

Correlation Coefficient

NVIDIA  Leef Brands

Very weak diversification

The 3 months correlation between NVIDIA and Leef is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands 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 Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of NVIDIA i.e., NVIDIA and Leef Brands go up and down completely randomly.

Pair Corralation between NVIDIA and Leef Brands

Given the investment horizon of 90 days NVIDIA is expected to generate 0.48 times more return on investment than Leef Brands. However, NVIDIA is 2.1 times less risky than Leef Brands. It trades about -0.07 of its potential returns per unit of risk. Leef Brands is currently generating about -0.04 per unit of risk. If you would invest  13,748  in NVIDIA on December 28, 2024 and sell it today you would lose (2,781) from holding NVIDIA or give up 20.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

NVIDIA  vs.  Leef Brands

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Leef Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leef Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and Leef Brands

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

The idea behind NVIDIA and Leef Brands 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.