Correlation Between NVIDIA and PGIM Large

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

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

Diversification Opportunities for NVIDIA and PGIM Large

0.38

Correlation Coefficient

NVIDIA  PGIM Large

Weak diversification

The 3 months correlation between NVIDIA and PGIM is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and PGIM Large Cap Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Large Cap 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 PGIM Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Large Cap has no effect on the direction of NVIDIA i.e., NVIDIA and PGIM Large go up and down completely randomly.

Pair Corralation between NVIDIA and PGIM Large

Given the investment horizon of 90 days NVIDIA is expected to generate 7.47 times more return on investment than PGIM Large. However, NVIDIA is 7.47 times more volatile than PGIM Large Cap Buffer. It trades about 0.0 of its potential returns per unit of risk. PGIM Large Cap Buffer is currently generating about -0.09 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (61.00) from holding NVIDIA or give up 0.42% 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.  PGIM Large Cap Buffer

NVIDIA

Risk-Adjusted Performance

7 of 100

Modest

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.

PGIM Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Large Cap Buffer are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PGIM Large is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NVIDIA and PGIM Large

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

The idea behind NVIDIA and PGIM Large Cap Buffer 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.