Correlation Between NVIDIA and Lumen Technologies

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

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

Diversification Opportunities for NVIDIA and Lumen Technologies

0.49

Correlation Coefficient

NVIDIA  Lumen Technologies

Very weak diversification

The 3 months correlation between NVIDIA and Lumen is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of NVIDIA i.e., NVIDIA and Lumen Technologies go up and down completely randomly.

Pair Corralation between NVIDIA and Lumen Technologies

Given the investment horizon of 90 days NVIDIA is expected to generate 1.01 times more return on investment than Lumen Technologies. However, NVIDIA is 1.01 times more volatile than Lumen Technologies. It trades about -0.06 of its potential returns per unit of risk. Lumen Technologies is currently generating about -0.09 per unit of risk. If you would invest  13,700  in NVIDIA on December 27, 2024 and sell it today you would lose (2,557) from holding NVIDIA or give up 18.66% of portfolio value over 90 days.

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

NVIDIA  vs.  Lumen Technologies

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 unsteady 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.

Lumen Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NVIDIA and Lumen Technologies

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

The idea behind NVIDIA and Lumen Technologies 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.