Correlation Between NVIDIA and Lumine

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

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

Diversification Opportunities for NVIDIA and Lumine

0.28

Correlation Coefficient

NVIDIA  Lumine

Modest diversification

The 3 months correlation between NVIDIA and Lumine is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Lumine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumine Group 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 Lumine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumine Group has no effect on the direction of NVIDIA i.e., NVIDIA and Lumine go up and down completely randomly.

Pair Corralation between NVIDIA and Lumine

Given the investment horizon of 90 days NVIDIA is expected to generate 1.85 times more return on investment than Lumine. However, NVIDIA is 1.85 times more volatile than Lumine Group. It trades about 0.02 of its potential returns per unit of risk. Lumine Group is currently generating about -0.35 per unit of risk. If you would invest  13,881  in NVIDIA on October 10, 2024 and sell it today you would earn a total of  83.50  from holding NVIDIA or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

NVIDIA  vs.  Lumine Group

NVIDIA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lumine Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lumine Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Lumine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Lumine

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

The idea behind NVIDIA and Lumine Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.