Correlation Between NVIDIA and Niagara Mohawk

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

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

Diversification Opportunities for NVIDIA and Niagara Mohawk

-0.23

Correlation Coefficient

NVIDIA  Niagara Mohawk

Very good diversification

The 3 months correlation between NVIDIA and Niagara is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of NVIDIA i.e., NVIDIA and Niagara Mohawk go up and down completely randomly.

Pair Corralation between NVIDIA and Niagara Mohawk

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Niagara Mohawk. In addition to that, NVIDIA is 6.1 times more volatile than Niagara Mohawk Power. It trades about -0.07 of its total potential returns per unit of risk. Niagara Mohawk Power is currently generating about 0.07 per unit of volatility. If you would invest  5,750  in Niagara Mohawk Power on December 29, 2024 and sell it today you would earn a total of  150.00  from holding Niagara Mohawk Power or generate 2.61% return on investment over 90 days.

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

NVIDIA  vs.  Niagara Mohawk Power

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.

Niagara Mohawk Power

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Niagara Mohawk is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NVIDIA and Niagara Mohawk

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

The idea behind NVIDIA and Niagara Mohawk Power 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.