Correlation Between NVIDIA and Volt Lithium

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

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

Diversification Opportunities for NVIDIA and Volt Lithium

-0.36

Correlation Coefficient

NVIDIA  Volt Lithium

Very good diversification

The 3 months correlation between NVIDIA and Volt is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Volt Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volt Lithium 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 Volt Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volt Lithium Corp has no effect on the direction of NVIDIA i.e., NVIDIA and Volt Lithium go up and down completely randomly.

Pair Corralation between NVIDIA and Volt Lithium

Given the investment horizon of 90 days NVIDIA is expected to generate 0.42 times more return on investment than Volt Lithium. However, NVIDIA is 2.35 times less risky than Volt Lithium. It trades about 0.16 of its potential returns per unit of risk. Volt Lithium Corp is currently generating about -0.06 per unit of risk. If you would invest  10,799  in NVIDIA on September 2, 2024 and sell it today you would earn a total of  3,026  from holding NVIDIA or generate 28.02% return on investment over 90 days.

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

NVIDIA  vs.  Volt Lithium Corp

NVIDIA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 12 (%) 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.

Volt Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volt Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and Volt Lithium

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

The idea behind NVIDIA and Volt Lithium 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.