Correlation Between NVIDIA and Newlake Capital

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

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

Diversification Opportunities for NVIDIA and Newlake Capital

-0.71

Correlation Coefficient

NVIDIA  Newlake Capital

Pay attention - limited upside

The 3 months correlation between NVIDIA and Newlake is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners 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 Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of NVIDIA i.e., NVIDIA and Newlake Capital go up and down completely randomly.

Pair Corralation between NVIDIA and Newlake Capital

Given the investment horizon of 90 days NVIDIA is expected to generate 1.85 times more return on investment than Newlake Capital. However, NVIDIA is 1.85 times more volatile than Newlake Capital Partners. It trades about 0.12 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about 0.11 per unit of risk. If you would invest  4,695  in NVIDIA on September 12, 2024 and sell it today you would earn a total of  8,812  from holding NVIDIA or generate 187.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.7%
Values	Daily Returns

NVIDIA  vs.  Newlake Capital Partners

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

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 unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Newlake Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NVIDIA and Newlake Capital

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

The idea behind NVIDIA and Newlake Capital Partners 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.