Correlation Between NVIDIA and Yancoal Australia

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

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

Diversification Opportunities for NVIDIA and Yancoal Australia

0.32

Correlation Coefficient

NVIDIA  Yancoal Australia

Weak diversification

The 3 months correlation between NVIDIA and Yancoal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia 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 Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of NVIDIA i.e., NVIDIA and Yancoal Australia go up and down completely randomly.

Pair Corralation between NVIDIA and Yancoal Australia

Given the investment horizon of 90 days NVIDIA is expected to generate 1.28 times more return on investment than Yancoal Australia. However, NVIDIA is 1.28 times more volatile than Yancoal Australia. It trades about 0.07 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.03 per unit of risk. If you would invest  12,771  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  1,060  from holding NVIDIA or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

NVIDIA  vs.  Yancoal Australia

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) 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.

Yancoal Australia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Yancoal Australia 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 Yancoal Australia

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

The idea behind NVIDIA and Yancoal Australia 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.