Correlation Between Farmacias Benavides and NVIDIA

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

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

Diversification Opportunities for Farmacias Benavides and NVIDIA

-0.16

Correlation Coefficient

Farmacias Benavides  NVIDIA

Good diversification

The 3 months correlation between Farmacias and NVIDIA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Farmacias Benavides SAB and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Farmacias Benavides 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 Farmacias Benavides SAB 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 Farmacias Benavides i.e., Farmacias Benavides and NVIDIA go up and down completely randomly.

Pair Corralation between Farmacias Benavides and NVIDIA

Assuming the 90 days trading horizon Farmacias Benavides is expected to generate 1.72 times less return on investment than NVIDIA. In addition to that, Farmacias Benavides is 1.02 times more volatile than NVIDIA. It trades about 0.08 of its total potential returns per unit of risk. NVIDIA is currently generating about 0.14 per unit of volatility. If you would invest  237,361  in NVIDIA on September 28, 2024 and sell it today you would earn a total of  45,845  from holding NVIDIA or generate 19.31% return on investment over 90 days.

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

Farmacias Benavides SAB  vs.  NVIDIA

Farmacias Benavides SAB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmacias Benavides SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Farmacias Benavides may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NVIDIA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NVIDIA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmacias Benavides and NVIDIA

The main advantage of trading using opposite Farmacias Benavides and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmacias Benavides 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 Farmacias Benavides SAB 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.