Correlation Between Smart Global and NVE

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

By analyzing existing cross correlation between Smart Global Holdings and NVE Corporation, you can compare the effects of market volatilities on Smart Global and NVE 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 Smart Global with a short position of NVE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Global and NVE.

Diversification Opportunities for Smart Global and NVE

-0.23

Correlation Coefficient

Smart Global  NVE

Very good diversification

The 3 months correlation between Smart and NVE is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Smart Global Holdings and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation and Smart Global 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 Smart Global Holdings are associated (or correlated) with NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of Smart Global i.e., Smart Global and NVE go up and down completely randomly.

Pair Corralation between Smart Global and NVE

If you would invest  7,462  in NVE Corporation on September 19, 2024 and sell it today you would earn a total of  407.00  from holding NVE Corporation or generate 5.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Smart Global Holdings  vs.  NVE Corp.

Smart Global Holdings

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Smart Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating technical and fundamental indicators, Smart Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NVE Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVE Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NVE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Smart Global and NVE

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

The idea behind Smart Global Holdings and NVE Corporation 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.