Correlation Between NVIDIA and Swan Defined

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

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

Diversification Opportunities for NVIDIA and Swan Defined

0.25

Correlation Coefficient

NVIDIA  Swan Defined

Modest diversification

The 3 months correlation between NVIDIA and Swan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk 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 Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of NVIDIA i.e., NVIDIA and Swan Defined go up and down completely randomly.

Pair Corralation between NVIDIA and Swan Defined

Given the investment horizon of 90 days NVIDIA is expected to generate 2.35 times more return on investment than Swan Defined. However, NVIDIA is 2.35 times more volatile than Swan Defined Risk. It trades about -0.11 of its potential returns per unit of risk. Swan Defined Risk is currently generating about -0.32 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (682.00) from holding NVIDIA or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NVIDIA  vs.  Swan Defined Risk

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.

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with NVIDIA and Swan Defined

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

The idea behind NVIDIA and Swan Defined Risk 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.