Correlation Between NVIDIA and Grayscale Livepeer

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

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

Diversification Opportunities for NVIDIA and Grayscale Livepeer

-0.4

Correlation Coefficient

NVIDIA  Grayscale Livepeer

Very good diversification

The 3 months correlation between NVIDIA and Grayscale is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Grayscale Livepeer Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Livepeer Trust 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 Grayscale Livepeer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Livepeer Trust has no effect on the direction of NVIDIA i.e., NVIDIA and Grayscale Livepeer go up and down completely randomly.

Pair Corralation between NVIDIA and Grayscale Livepeer

Given the investment horizon of 90 days NVIDIA is expected to generate 2.13 times less return on investment than Grayscale Livepeer. But when comparing it to its historical volatility, NVIDIA is 5.06 times less risky than Grayscale Livepeer. It trades about 0.09 of its potential returns per unit of risk. Grayscale Livepeer Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Grayscale Livepeer Trust on September 20, 2024 and sell it today you would lose (200.00) from holding Grayscale Livepeer Trust or give up 13.79% of portfolio value over 90 days.

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

NVIDIA  vs.  Grayscale Livepeer Trust

NVIDIA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Grayscale Livepeer Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Livepeer Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Grayscale Livepeer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Grayscale Livepeer

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

The idea behind NVIDIA and Grayscale Livepeer Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.