Correlation Between NVIDIA and Stratasys

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

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

Diversification Opportunities for NVIDIA and Stratasys

0.52

Correlation Coefficient

NVIDIA  Stratasys

Very weak diversification

The 3 months correlation between NVIDIA and Stratasys is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys 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 Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of NVIDIA i.e., NVIDIA and Stratasys go up and down completely randomly.

Pair Corralation between NVIDIA and Stratasys

Given the investment horizon of 90 days NVIDIA is expected to generate 3.0 times less return on investment than Stratasys. But when comparing it to its historical volatility, NVIDIA is 1.89 times less risky than Stratasys. It trades about 0.1 of its potential returns per unit of risk. Stratasys is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  706.00  in Stratasys on September 12, 2024 and sell it today you would earn a total of  316.00  from holding Stratasys or generate 44.76% return on investment over 90 days.

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

NVIDIA  vs.  Stratasys

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Stratasys

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Stratasys

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

The idea behind NVIDIA and Stratasys 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.