Correlation Between NVIDIA and Super Micro

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

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

Diversification Opportunities for NVIDIA and Super Micro

-0.46

Correlation Coefficient

NVIDIA  Super Micro

Very good diversification

The 3 months correlation between NVIDIA and Super is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer 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 Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of NVIDIA i.e., NVIDIA and Super Micro go up and down completely randomly.

Pair Corralation between NVIDIA and Super Micro

Given the investment horizon of 90 days NVIDIA is expected to generate 0.45 times more return on investment than Super Micro. However, NVIDIA is 2.22 times less risky than Super Micro. It trades about 0.12 of its potential returns per unit of risk. Super Micro Computer is currently generating about 0.05 per unit of risk. If you would invest  4,550  in NVIDIA on September 12, 2024 and sell it today you would earn a total of  8,957  from holding NVIDIA or generate 196.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.72%
Values	Daily Returns

NVIDIA  vs.  Super Micro Computer

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.

Super Micro Computer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Super Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Super Micro

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

The idea behind NVIDIA and Super Micro Computer 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 CEOs Directory module to screen CEOs from public companies around the world.