Correlation Between NVIDIA and WD-40 CO

Can any of the company-specific risk be diversified away by investing in both NVIDIA and WD-40 CO 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 WD-40 CO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NVIDIA and WD 40 CO, you can compare the effects of market volatilities on NVIDIA and WD-40 CO 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 WD-40 CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and WD-40 CO.

Diversification Opportunities for NVIDIA and WD-40 CO

0.26

Correlation Coefficient

NVIDIA  WD-40 CO

Modest diversification

The 3 months correlation between NVIDIA and WD-40 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and WD 40 CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 CO 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 WD-40 CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 CO has no effect on the direction of NVIDIA i.e., NVIDIA and WD-40 CO go up and down completely randomly.

Pair Corralation between NVIDIA and WD-40 CO

Given the investment horizon of 90 days NVIDIA is expected to generate 1.27 times more return on investment than WD-40 CO. However, NVIDIA is 1.27 times more volatile than WD 40 CO. It trades about 0.1 of its potential returns per unit of risk. WD 40 CO is currently generating about 0.01 per unit of risk. If you would invest  12,771  in NVIDIA on October 7, 2024 and sell it today you would earn a total of  1,676  from holding NVIDIA or generate 13.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

NVIDIA  vs.  WD 40 CO

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.

WD 40 CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WD 40 CO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WD-40 CO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NVIDIA and WD-40 CO

The main advantage of trading using opposite NVIDIA and WD-40 CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, WD-40 CO 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 WD-40 CO will offset losses from the drop in WD-40 CO's long position.

The idea behind NVIDIA and WD 40 CO 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.