Correlation Between NVIDIA and Reitmans

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

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

Diversification Opportunities for NVIDIA and Reitmans

-0.68

Correlation Coefficient

NVIDIA  Reitmans

Excellent diversification

The 3 months correlation between NVIDIA and Reitmans is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans Limited 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 Reitmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans Limited has no effect on the direction of NVIDIA i.e., NVIDIA and Reitmans go up and down completely randomly.

Pair Corralation between NVIDIA and Reitmans

Given the investment horizon of 90 days NVIDIA is expected to generate 1.17 times more return on investment than Reitmans. However, NVIDIA is 1.17 times more volatile than Reitmans Limited. It trades about 0.16 of its potential returns per unit of risk. Reitmans Limited is currently generating about 0.01 per unit of risk. If you would invest  1,425  in NVIDIA on September 26, 2024 and sell it today you would earn a total of  12,597  from holding NVIDIA or generate 884.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

NVIDIA  vs.  Reitmans Limited

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 weak fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Reitmans Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reitmans is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVIDIA and Reitmans

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

The idea behind NVIDIA and Reitmans Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.