Correlation Between NVIDIA Corp and Axis Bank

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

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

Diversification Opportunities for NVIDIA Corp and Axis Bank

-0.59

Correlation Coefficient

NVIDIA Corp  Axis Bank

Excellent diversification

The 3 months correlation between NVIDIA and Axis is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA Corp and Axis Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axis Bank and NVIDIA Corp 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 Corp are associated (or correlated) with Axis Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axis Bank has no effect on the direction of NVIDIA Corp i.e., NVIDIA Corp and Axis Bank go up and down completely randomly.

Pair Corralation between NVIDIA Corp and Axis Bank

Assuming the 90 days trading horizon NVIDIA Corp is expected to generate 1.97 times more return on investment than Axis Bank. However, NVIDIA Corp is 1.97 times more volatile than Axis Bank Ltd. It trades about 0.09 of its potential returns per unit of risk. Axis Bank Ltd is currently generating about -0.05 per unit of risk. If you would invest  11,936  in NVIDIA Corp on August 31, 2024 and sell it today you would earn a total of  1,661  from holding NVIDIA Corp or generate 13.92% return on investment over 90 days.

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

NVIDIA Corp  vs.  Axis Bank Ltd

NVIDIA Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NVIDIA Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Axis Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Axis Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NVIDIA Corp and Axis Bank

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

The idea behind NVIDIA Corp and Axis Bank Ltd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.