Correlation Between NVIDIA and WBX WT

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

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

Diversification Opportunities for NVIDIA and WBX WT

0.62

Correlation Coefficient

NVIDIA  WBX WT

Poor diversification

The 3 months correlation between NVIDIA and WBX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and WBX WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBX WT 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 WBX WT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBX WT has no effect on the direction of NVIDIA i.e., NVIDIA and WBX WT go up and down completely randomly.

Pair Corralation between NVIDIA and WBX WT

Given the investment horizon of 90 days NVIDIA is expected to generate 2.3 times less return on investment than WBX WT. But when comparing it to its historical volatility, NVIDIA is 6.37 times less risky than WBX WT. It trades about 0.16 of its potential returns per unit of risk. WBX WT is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  44.00  in WBX WT on September 21, 2024 and sell it today you would lose (39.96) from holding WBX WT or give up 90.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.65%
Values	Daily Returns

NVIDIA  vs.  WBX WT

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.

WBX WT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WBX WT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, WBX WT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and WBX WT

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

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