Correlation Between NVIDIA and Seek

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

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

Diversification Opportunities for NVIDIA and Seek

-0.22

Correlation Coefficient

NVIDIA  Seek

Very good diversification

The 3 months correlation between NVIDIA and Seek is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Seek Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seek Ltd ADR 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 Seek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seek Ltd ADR has no effect on the direction of NVIDIA i.e., NVIDIA and Seek go up and down completely randomly.

Pair Corralation between NVIDIA and Seek

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Seek. In addition to that, NVIDIA is 1.95 times more volatile than Seek Ltd ADR. It trades about -0.07 of its total potential returns per unit of risk. Seek Ltd ADR is currently generating about -0.01 per unit of volatility. If you would invest  2,824  in Seek Ltd ADR on December 29, 2024 and sell it today you would lose (63.00) from holding Seek Ltd ADR or give up 2.23% of portfolio value over 90 days.

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

NVIDIA  vs.  Seek Ltd ADR

NVIDIA

Risk-Adjusted Performance

Very Weak

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

Seek Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seek Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Seek is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and Seek

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

The idea behind NVIDIA and Seek Ltd ADR 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.