Correlation Between NVIDIA and Simat Technologies

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

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

Diversification Opportunities for NVIDIA and Simat Technologies

0.2

Correlation Coefficient

NVIDIA  Simat Technologies

Modest diversification

The 3 months correlation between NVIDIA and Simat is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Simat Technologies Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simat Technologies Public 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 Simat Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simat Technologies Public has no effect on the direction of NVIDIA i.e., NVIDIA and Simat Technologies go up and down completely randomly.

Pair Corralation between NVIDIA and Simat Technologies

Given the investment horizon of 90 days NVIDIA is expected to generate 3.87 times less return on investment than Simat Technologies. But when comparing it to its historical volatility, NVIDIA is 14.48 times less risky than Simat Technologies. It trades about 0.15 of its potential returns per unit of risk. Simat Technologies Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Simat Technologies Public on October 4, 2024 and sell it today you would lose (79.00) from holding Simat Technologies Public or give up 35.59% of portfolio value over 90 days.

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

NVIDIA  vs.  Simat Technologies Public

NVIDIA

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) 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.

Simat Technologies Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simat Technologies Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NVIDIA and Simat Technologies

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

The idea behind NVIDIA and Simat Technologies Public 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.