Correlation Between NVIDIA and Pacific Capital

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

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

Diversification Opportunities for NVIDIA and Pacific Capital

-0.39

Correlation Coefficient

NVIDIA  Pacific Capital

Very good diversification

The 3 months correlation between NVIDIA and Pacific is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Pacific Capital Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Capital Tax 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 Pacific Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Capital Tax has no effect on the direction of NVIDIA i.e., NVIDIA and Pacific Capital go up and down completely randomly.

Pair Corralation between NVIDIA and Pacific Capital

Given the investment horizon of 90 days NVIDIA is expected to generate 14.46 times more return on investment than Pacific Capital. However, NVIDIA is 14.46 times more volatile than Pacific Capital Tax Free. It trades about 0.0 of its potential returns per unit of risk. Pacific Capital Tax Free is currently generating about -0.27 per unit of risk. If you would invest  14,506  in NVIDIA on October 6, 2024 and sell it today you would lose (59.00) from holding NVIDIA or give up 0.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

NVIDIA  vs.  Pacific Capital Tax Free

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

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.

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pacific Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and Pacific Capital

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

The idea behind NVIDIA and Pacific Capital Tax Free 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.