Correlation Between NVIDIA and Rithm Capital

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

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

Diversification Opportunities for NVIDIA and Rithm Capital

-0.04

Correlation Coefficient

NVIDIA  Rithm Capital

Good diversification

The 3 months correlation between NVIDIA and Rithm is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Rithm Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Capital Corp 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 Rithm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Capital Corp has no effect on the direction of NVIDIA i.e., NVIDIA and Rithm Capital go up and down completely randomly.

Pair Corralation between NVIDIA and Rithm Capital

Given the investment horizon of 90 days NVIDIA is expected to generate 7.05 times more return on investment than Rithm Capital. However, NVIDIA is 7.05 times more volatile than Rithm Capital Corp. It trades about 0.04 of its potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.16 per unit of risk. If you would invest  14,051  in NVIDIA on October 26, 2024 and sell it today you would earn a total of  656.00  from holding NVIDIA or generate 4.67% return on investment over 90 days.

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

NVIDIA  vs.  Rithm Capital Corp

NVIDIA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 3 (%) 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.

Rithm Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Rithm Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA and Rithm Capital

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

The idea behind NVIDIA and Rithm Capital Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.