Correlation Between NVIDIA and Lifco AB

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

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

Diversification Opportunities for NVIDIA and Lifco AB

-0.51

Correlation Coefficient

NVIDIA  Lifco AB

Excellent diversification

The 3 months correlation between NVIDIA and Lifco is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Lifco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifco AB 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 Lifco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifco AB has no effect on the direction of NVIDIA i.e., NVIDIA and Lifco AB go up and down completely randomly.

Pair Corralation between NVIDIA and Lifco AB

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Lifco AB. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 2.05 times less risky than Lifco AB. The stock trades about -0.03 of its potential returns per unit of risk. The Lifco AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,435  in Lifco AB on December 19, 2024 and sell it today you would earn a total of  293.00  from holding Lifco AB or generate 20.42% return on investment over 90 days.

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

NVIDIA  vs.  Lifco AB

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 latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lifco AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifco AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, Lifco AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Lifco AB

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

The idea behind NVIDIA and Lifco AB 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.