Correlation Between Metalrgica Riosulense and NVIDIA

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

By analyzing existing cross correlation between Metalrgica Riosulense SA and NVIDIA, you can compare the effects of market volatilities on Metalrgica Riosulense and NVIDIA 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 Metalrgica Riosulense with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalrgica Riosulense and NVIDIA.

Diversification Opportunities for Metalrgica Riosulense and NVIDIA

-0.82

Correlation Coefficient

Metalrgica Riosulense  NVIDIA

Pay attention - limited upside

The 3 months correlation between Metalrgica and NVIDIA is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Metalrgica Riosulense 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 Metalrgica Riosulense SA are associated (or correlated) with NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Metalrgica Riosulense i.e., Metalrgica Riosulense and NVIDIA go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and NVIDIA

Assuming the 90 days trading horizon Metalrgica Riosulense SA is expected to generate 0.29 times more return on investment than NVIDIA. However, Metalrgica Riosulense SA is 3.4 times less risky than NVIDIA. It trades about 0.38 of its potential returns per unit of risk. NVIDIA is currently generating about -0.07 per unit of risk. If you would invest  5,500  in Metalrgica Riosulense SA on December 25, 2024 and sell it today you would earn a total of  1,574  from holding Metalrgica Riosulense SA or generate 28.62% return on investment over 90 days.

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

Metalrgica Riosulense SA  vs.  NVIDIA

Metalrgica Riosulense

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metalrgica Riosulense SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalrgica Riosulense unveiled solid returns over the last few months and may actually be approaching a breakup point.

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA 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 fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Metalrgica Riosulense and NVIDIA

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

The idea behind Metalrgica Riosulense SA and NVIDIA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.