Correlation Between NVIDIA and Nexstar Media

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

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

Diversification Opportunities for NVIDIA and Nexstar Media

0.53

Correlation Coefficient

NVIDIA  Nexstar Media

Very weak diversification

The 3 months correlation between NVIDIA and Nexstar is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Nexstar Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Media Group 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 Nexstar Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Media Group has no effect on the direction of NVIDIA i.e., NVIDIA and Nexstar Media go up and down completely randomly.

Pair Corralation between NVIDIA and Nexstar Media

Given the investment horizon of 90 days NVIDIA is expected to generate 1.45 times more return on investment than Nexstar Media. However, NVIDIA is 1.45 times more volatile than Nexstar Media Group. It trades about -0.11 of its potential returns per unit of risk. Nexstar Media Group is currently generating about -0.19 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (682.00) from holding NVIDIA or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

NVIDIA  vs.  Nexstar Media Group

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nexstar Media Group

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Nexstar Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nexstar Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVIDIA and Nexstar Media

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

The idea behind NVIDIA and Nexstar Media Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.