Correlation Between NVIDIA and Lanxess AG

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

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

Diversification Opportunities for NVIDIA and Lanxess AG

0.32

Correlation Coefficient

NVIDIA  Lanxess AG

Weak diversification

The 3 months correlation between NVIDIA and Lanxess is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Lanxess AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanxess AG 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 Lanxess AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanxess AG has no effect on the direction of NVIDIA i.e., NVIDIA and Lanxess AG go up and down completely randomly.

Pair Corralation between NVIDIA and Lanxess AG

Given the investment horizon of 90 days NVIDIA is expected to generate 0.88 times more return on investment than Lanxess AG. However, NVIDIA is 1.14 times less risky than Lanxess AG. It trades about 0.0 of its potential returns per unit of risk. Lanxess AG is currently generating about -0.27 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (66.00) from holding NVIDIA or give up 0.45% of portfolio value over 90 days.

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

NVIDIA  vs.  Lanxess AG

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

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

Lanxess AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NVIDIA and Lanxess AG

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

The idea behind NVIDIA and Lanxess AG 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.