Correlation Between NVIDIA and Short Term

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

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

Diversification Opportunities for NVIDIA and Short Term

-0.18

Correlation Coefficient

NVIDIA  Short Term

Good diversification

The 3 months correlation between NVIDIA and Short is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Short Term Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of NVIDIA i.e., NVIDIA and Short Term go up and down completely randomly.

Pair Corralation between NVIDIA and Short Term

Given the investment horizon of 90 days NVIDIA is expected to generate 34.42 times more return on investment than Short Term. However, NVIDIA is 34.42 times more volatile than Short Term Fund R. It trades about 0.14 of its potential returns per unit of risk. Short Term Fund R is currently generating about 0.24 per unit of risk. If you would invest  1,915  in NVIDIA on October 21, 2024 and sell it today you would earn a total of  11,856  from holding NVIDIA or generate 619.11% return on investment over 90 days.

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

NVIDIA  vs.  Short Term Fund R

NVIDIA

Risk-Adjusted Performance

0 of 100

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.

Short Term Fund

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund R are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Term 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 Short Term

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

The idea behind NVIDIA and Short Term Fund R 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.