Correlation Between NVIDIA and SISF BRIC

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

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

Diversification Opportunities for NVIDIA and SISF BRIC

-0.2

Correlation Coefficient

NVIDIA  SISF BRIC

Good diversification

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

Pair Corralation between NVIDIA and SISF BRIC

Given the investment horizon of 90 days NVIDIA is expected to generate 2.64 times more return on investment than SISF BRIC. However, NVIDIA is 2.64 times more volatile than SISF BRIC AC. It trades about 0.15 of its potential returns per unit of risk. SISF BRIC AC is currently generating about 0.06 per unit of risk. If you would invest  1,769  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  12,062  from holding NVIDIA or generate 681.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.74%
Values	Daily Returns

NVIDIA  vs.  SISF BRIC AC

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.

SISF BRIC AC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SISF BRIC AC has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with NVIDIA and SISF BRIC

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

The idea behind NVIDIA and SISF BRIC AC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.