Correlation Between NVIDIA and BAUER Aktiengesellscha

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

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

Diversification Opportunities for NVIDIA and BAUER Aktiengesellscha

-0.45

Correlation Coefficient

NVIDIA  BAUER Aktiengesellscha

Very good diversification

The 3 months correlation between NVIDIA and BAUER is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and BAUER Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAUER Aktiengesellschaft 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 BAUER Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAUER Aktiengesellschaft has no effect on the direction of NVIDIA i.e., NVIDIA and BAUER Aktiengesellscha go up and down completely randomly.

Pair Corralation between NVIDIA and BAUER Aktiengesellscha

Given the investment horizon of 90 days NVIDIA is expected to generate 4.23 times more return on investment than BAUER Aktiengesellscha. However, NVIDIA is 4.23 times more volatile than BAUER Aktiengesellschaft. It trades about 0.17 of its potential returns per unit of risk. BAUER Aktiengesellschaft is currently generating about -0.03 per unit of risk. If you would invest  11,661  in NVIDIA on February 1, 2024 and sell it today you would earn a total of  74,741  from holding NVIDIA or generate 640.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NVIDIA  vs.  BAUER Aktiengesellschaft

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

BAUER Aktiengesellschaft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAUER Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, BAUER Aktiengesellscha is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVIDIA and BAUER Aktiengesellscha

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

The idea behind NVIDIA and BAUER Aktiengesellschaft 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.