Correlation Between NVIDIA and A1DI34

Can any of the company-specific risk be diversified away by investing in both NVIDIA and A1DI34 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 A1DI34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NVIDIA and A1DI34, you can compare the effects of market volatilities on NVIDIA and A1DI34 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 A1DI34. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and A1DI34.

Diversification Opportunities for NVIDIA and A1DI34

0.72

Correlation Coefficient

NVIDIA  A1DI34

Poor diversification

The 3 months correlation between NVIDIA and A1DI34 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and A1DI34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1DI34 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 A1DI34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1DI34 has no effect on the direction of NVIDIA i.e., NVIDIA and A1DI34 go up and down completely randomly.

Pair Corralation between NVIDIA and A1DI34

Assuming the 90 days trading horizon NVIDIA is expected to generate 1.67 times more return on investment than A1DI34. However, NVIDIA is 1.67 times more volatile than A1DI34. It trades about 0.16 of its potential returns per unit of risk. A1DI34 is currently generating about 0.07 per unit of risk. If you would invest  1,379  in NVIDIA on September 24, 2024 and sell it today you would earn a total of  324.00  from holding NVIDIA or generate 23.5% return on investment over 90 days.

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

NVIDIA  vs.  A1DI34

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

A1DI34

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in A1DI34 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, A1DI34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NVIDIA and A1DI34

The main advantage of trading using opposite NVIDIA and A1DI34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, A1DI34 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 A1DI34 will offset losses from the drop in A1DI34's long position.

The idea behind NVIDIA and A1DI34 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.