Correlation Between NVIDIA and Solution Financial

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

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

Diversification Opportunities for NVIDIA and Solution Financial

0.1

Correlation Coefficient

NVIDIA  Solution Financial

Average diversification

The 3 months correlation between NVIDIA and Solution is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of NVIDIA i.e., NVIDIA and Solution Financial go up and down completely randomly.

Pair Corralation between NVIDIA and Solution Financial

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Solution Financial. In addition to that, NVIDIA is 1.7 times more volatile than Solution Financial. It trades about -0.07 of its total potential returns per unit of risk. Solution Financial is currently generating about 0.01 per unit of volatility. If you would invest  20.00  in Solution Financial on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Solution Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NVIDIA  vs.  Solution Financial

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.

Solution Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solution Financial 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 Solution Financial

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

The idea behind NVIDIA and Solution Financial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.