Correlation Between NVIDIA and Navitas Semiconductor

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

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

Diversification Opportunities for NVIDIA and Navitas Semiconductor

0.08

Correlation Coefficient

NVIDIA  Navitas Semiconductor

Significant diversification

The 3 months correlation between NVIDIA and Navitas is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Navitas Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navitas Semiconductor 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 Navitas Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navitas Semiconductor has no effect on the direction of NVIDIA i.e., NVIDIA and Navitas Semiconductor go up and down completely randomly.

Pair Corralation between NVIDIA and Navitas Semiconductor

Given the investment horizon of 90 days NVIDIA is expected to generate 5.33 times less return on investment than Navitas Semiconductor. But when comparing it to its historical volatility, NVIDIA is 2.82 times less risky than Navitas Semiconductor. It trades about 0.1 of its potential returns per unit of risk. Navitas Semiconductor Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Navitas Semiconductor Corp on September 12, 2024 and sell it today you would earn a total of  203.00  from holding Navitas Semiconductor Corp or generate 87.5% return on investment over 90 days.

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

NVIDIA  vs.  Navitas Semiconductor Corp

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.

Navitas Semiconductor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Navitas Semiconductor Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Navitas Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Navitas Semiconductor

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

The idea behind NVIDIA and Navitas Semiconductor Corp 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.