Correlation Between NVIDIA and Münchener Rückversicherung

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

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

Diversification Opportunities for NVIDIA and Münchener Rückversicherung

-0.68

Correlation Coefficient

NVIDIA  Münchener Rückversicherung

Excellent diversification

The 3 months correlation between NVIDIA and Münchener is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Mnchener Rckversicherungs Gese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Münchener Rückversicherung 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 Münchener Rückversicherung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Münchener Rückversicherung has no effect on the direction of NVIDIA i.e., NVIDIA and Münchener Rückversicherung go up and down completely randomly.

Pair Corralation between NVIDIA and Münchener Rückversicherung

Given the investment horizon of 90 days NVIDIA is expected to generate 1.61 times more return on investment than Münchener Rückversicherung. However, NVIDIA is 1.61 times more volatile than Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft. It trades about 0.16 of its potential returns per unit of risk. Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft is currently generating about -0.02 per unit of risk. If you would invest  10,799  in NVIDIA on September 3, 2024 and sell it today you would earn a total of  3,026  from holding NVIDIA or generate 28.02% return on investment over 90 days.

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

NVIDIA  vs.  Mnchener Rckversicherungs Gese

NVIDIA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Münchener Rückversicherung

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Münchener Rückversicherung is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVIDIA and Münchener Rückversicherung

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

The idea behind NVIDIA and Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.