Correlation Between NVIDIA and Manitowoc

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

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

Diversification Opportunities for NVIDIA and Manitowoc

0.01

Correlation Coefficient

NVIDIA  Manitowoc

Significant diversification

The 3 months correlation between NVIDIA and Manitowoc is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Manitowoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitowoc 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 Manitowoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitowoc has no effect on the direction of NVIDIA i.e., NVIDIA and Manitowoc go up and down completely randomly.

Pair Corralation between NVIDIA and Manitowoc

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Manitowoc. In addition to that, NVIDIA is 1.25 times more volatile than Manitowoc. It trades about -0.03 of its total potential returns per unit of risk. Manitowoc is currently generating about 0.0 per unit of volatility. If you would invest  1,058  in Manitowoc on December 2, 2024 and sell it today you would lose (23.00) from holding Manitowoc or give up 2.17% of portfolio value over 90 days.

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

NVIDIA  vs.  Manitowoc

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 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.

Manitowoc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manitowoc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Manitowoc is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NVIDIA and Manitowoc

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

The idea behind NVIDIA and Manitowoc 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 Transaction History module to view history of all your transactions and understand their impact on performance.