Correlation Between NVIDIA and Wolfden Resources

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

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

Diversification Opportunities for NVIDIA and Wolfden Resources

0.39

Correlation Coefficient

NVIDIA  Wolfden Resources

Weak diversification

The 3 months correlation between NVIDIA and Wolfden is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Wolfden Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfden Resources 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 Wolfden Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfden Resources has no effect on the direction of NVIDIA i.e., NVIDIA and Wolfden Resources go up and down completely randomly.

Pair Corralation between NVIDIA and Wolfden Resources

Given the investment horizon of 90 days NVIDIA is expected to generate 0.21 times more return on investment than Wolfden Resources. However, NVIDIA is 4.8 times less risky than Wolfden Resources. It trades about 0.15 of its potential returns per unit of risk. Wolfden Resources is currently generating about 0.03 per unit of risk. If you would invest  1,689  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  11,740  from holding NVIDIA or generate 695.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

NVIDIA  vs.  Wolfden Resources

NVIDIA

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wolfden Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfden Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Wolfden Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Wolfden Resources

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

The idea behind NVIDIA and Wolfden Resources 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.