Correlation Between NVIDIA and Valeura Energy

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

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

Diversification Opportunities for NVIDIA and Valeura Energy

0.41

Correlation Coefficient

NVIDIA  Valeura Energy

Very weak diversification

The 3 months correlation between NVIDIA and Valeura is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of NVIDIA i.e., NVIDIA and Valeura Energy go up and down completely randomly.

Pair Corralation between NVIDIA and Valeura Energy

Given the investment horizon of 90 days NVIDIA is expected to generate 0.64 times more return on investment than Valeura Energy. However, NVIDIA is 1.56 times less risky than Valeura Energy. It trades about 0.16 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.08 per unit of risk. If you would invest  10,799  in NVIDIA on September 2, 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NVIDIA  vs.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Valeura Energy

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

The idea behind NVIDIA and Valeura Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.