Correlation Between NVIDIA and RMB Holdings

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

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

Diversification Opportunities for NVIDIA and RMB Holdings

0.06

Correlation Coefficient

NVIDIA  RMB Holdings

Significant diversification

The 3 months correlation between NVIDIA and RMB is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of NVIDIA i.e., NVIDIA and RMB Holdings go up and down completely randomly.

Pair Corralation between NVIDIA and RMB Holdings

Given the investment horizon of 90 days NVIDIA is expected to generate 1.25 times more return on investment than RMB Holdings. However, NVIDIA is 1.25 times more volatile than RMB Holdings. It trades about 0.07 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.07 per unit of risk. If you would invest  12,771  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  1,060  from holding NVIDIA or generate 8.3% return on investment over 90 days.

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

NVIDIA  vs.  RMB Holdings

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) 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.

RMB Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RMB Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NVIDIA and RMB Holdings

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

The idea behind NVIDIA and RMB Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.