Correlation Between NVIDIA and Procyon

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

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

Diversification Opportunities for NVIDIA and Procyon

-0.58

Correlation Coefficient

NVIDIA  Procyon

Excellent diversification

The 3 months correlation between NVIDIA and Procyon is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Procyon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procyon 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 Procyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procyon has no effect on the direction of NVIDIA i.e., NVIDIA and Procyon go up and down completely randomly.

Pair Corralation between NVIDIA and Procyon

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Procyon. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 1.66 times less risky than Procyon. The stock trades about -0.09 of its potential returns per unit of risk. The Procyon is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Procyon on October 4, 2024 and sell it today you would earn a total of  4.00  from holding Procyon or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

NVIDIA  vs.  Procyon

NVIDIA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 4 (%) 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.

Procyon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procyon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Procyon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and Procyon

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

The idea behind NVIDIA and Procyon 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.