Correlation Between Compania and NVIDIA

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

By analyzing existing cross correlation between Compania de Transporte and NVIDIA, you can compare the effects of market volatilities on Compania and NVIDIA 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 Compania with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and NVIDIA.

Diversification Opportunities for Compania and NVIDIA

0.08

Correlation Coefficient

Compania  NVIDIA

Significant diversification

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

Pair Corralation between Compania and NVIDIA

Assuming the 90 days trading horizon Compania de Transporte is expected to generate 1.48 times more return on investment than NVIDIA. However, Compania is 1.48 times more volatile than NVIDIA. It trades about 0.2 of its potential returns per unit of risk. NVIDIA is currently generating about 0.01 per unit of risk. If you would invest  185,500  in Compania de Transporte on September 15, 2024 and sell it today you would earn a total of  90,000  from holding Compania de Transporte or generate 48.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Compania de Transporte  vs.  NVIDIA

Compania de Transporte

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

NVIDIA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NVIDIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania and NVIDIA

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

The idea behind Compania de Transporte and NVIDIA 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 CEOs Directory module to screen CEOs from public companies around the world.