Correlation Between NVIDIA and Intel

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

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

Diversification Opportunities for NVIDIA and Intel

0.54

Correlation Coefficient

NVIDIA  Intel

Very weak diversification

The 3 months correlation between NVIDIA and Intel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of NVIDIA i.e., NVIDIA and Intel go up and down completely randomly.

Pair Corralation between NVIDIA and Intel

Assuming the 90 days trading horizon NVIDIA is expected to generate 0.81 times more return on investment than Intel. However, NVIDIA is 1.23 times less risky than Intel. It trades about 0.13 of its potential returns per unit of risk. Intel is currently generating about -0.05 per unit of risk. If you would invest  225,953  in NVIDIA on September 23, 2024 and sell it today you would earn a total of  42,415  from holding NVIDIA or generate 18.77% return on investment over 90 days.

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

NVIDIA  vs.  Intel

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.

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NVIDIA and Intel

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

The idea behind NVIDIA and Intel 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.