Correlation Between NVIDIA and Valens

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

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

Diversification Opportunities for NVIDIA and Valens

0.63

Correlation Coefficient

NVIDIA  Valens

Poor diversification

The 3 months correlation between NVIDIA and Valens is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of NVIDIA i.e., NVIDIA and Valens go up and down completely randomly.

Pair Corralation between NVIDIA and Valens

Given the investment horizon of 90 days NVIDIA is expected to generate 1.02 times more return on investment than Valens. However, NVIDIA is 1.02 times more volatile than Valens. It trades about -0.07 of its potential returns per unit of risk. Valens is currently generating about -0.11 per unit of risk. If you would invest  13,748  in NVIDIA on December 28, 2024 and sell it today you would lose (2,781) from holding NVIDIA or give up 20.23% of portfolio value over 90 days.

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

NVIDIA  vs.  Valens

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Valens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NVIDIA and Valens

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

The idea behind NVIDIA and Valens 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.