Correlation Between NVIDIA and RTL Group

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

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

Diversification Opportunities for NVIDIA and RTL Group

0.51

Correlation Coefficient

NVIDIA  RTL Group

Very weak diversification

The 3 months correlation between NVIDIA and RTL is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of NVIDIA i.e., NVIDIA and RTL Group go up and down completely randomly.

Pair Corralation between NVIDIA and RTL Group

Given the investment horizon of 90 days NVIDIA is expected to generate 1.46 times more return on investment than RTL Group. However, NVIDIA is 1.46 times more volatile than RTL Group SA. It trades about -0.05 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.13 per unit of risk. If you would invest  13,748  in NVIDIA on December 28, 2024 and sell it today you would lose (2,372) from holding NVIDIA or give up 17.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

NVIDIA  vs.  RTL Group SA

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 unfluctuating 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.

RTL Group SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and RTL Group

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

The idea behind NVIDIA and RTL Group SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..