Correlation Between NVIDIA and Targa Resources

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

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

Diversification Opportunities for NVIDIA and Targa Resources

0.16

Correlation Coefficient

NVIDIA  Targa Resources

Average diversification

The 3 months correlation between NVIDIA and Targa is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources Corp 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 Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of NVIDIA i.e., NVIDIA and Targa Resources go up and down completely randomly.

Pair Corralation between NVIDIA and Targa Resources

Given the investment horizon of 90 days NVIDIA is expected to generate 2.03 times less return on investment than Targa Resources. In addition to that, NVIDIA is 1.1 times more volatile than Targa Resources Corp. It trades about 0.08 of its total potential returns per unit of risk. Targa Resources Corp is currently generating about 0.19 per unit of volatility. If you would invest  14,265  in Targa Resources Corp on October 4, 2024 and sell it today you would earn a total of  3,500  from holding Targa Resources Corp or generate 24.54% return on investment over 90 days.

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

NVIDIA  vs.  Targa Resources Corp

NVIDIA

Risk-Adjusted Performance

6 of 100

Modest

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.

Targa Resources Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Targa Resources

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

The idea behind NVIDIA and Targa Resources Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.