Correlation Between NVIDIA and Varta AG

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

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

Diversification Opportunities for NVIDIA and Varta AG

0.06

Correlation Coefficient

NVIDIA  Varta AG

Significant diversification

The 3 months correlation between NVIDIA and Varta is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of NVIDIA i.e., NVIDIA and Varta AG go up and down completely randomly.

Pair Corralation between NVIDIA and Varta AG

Given the investment horizon of 90 days NVIDIA is expected to generate 0.38 times more return on investment than Varta AG. However, NVIDIA is 2.65 times less risky than Varta AG. It trades about 0.14 of its potential returns per unit of risk. Varta AG is currently generating about -0.02 per unit of risk. If you would invest  1,915  in NVIDIA on October 20, 2024 and sell it today you would earn a total of  11,856  from holding NVIDIA or generate 619.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

NVIDIA  vs.  Varta AG

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NVIDIA and Varta AG

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

The idea behind NVIDIA and Varta AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.