Correlation Between NVIDIA and Upstart Holdings

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

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

Diversification Opportunities for NVIDIA and Upstart Holdings

0.77

Correlation Coefficient

NVIDIA  Upstart Holdings

Poor diversification

The 3 months correlation between NVIDIA and Upstart is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Upstart Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upstart Holdings 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 Upstart Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upstart Holdings has no effect on the direction of NVIDIA i.e., NVIDIA and Upstart Holdings go up and down completely randomly.

Pair Corralation between NVIDIA and Upstart Holdings

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Upstart Holdings. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 2.23 times less risky than Upstart Holdings. The stock trades about -0.14 of its potential returns per unit of risk. The Upstart Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,748  in Upstart Holdings on September 12, 2024 and sell it today you would lose (346.00) from holding Upstart Holdings or give up 4.47% of portfolio value over 90 days.

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

NVIDIA  vs.  Upstart Holdings

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.

Upstart Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Upstart Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Upstart Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Upstart Holdings

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

The idea behind NVIDIA and Upstart Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.