Correlation Between NVIDIA and Nova Technology

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

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

Diversification Opportunities for NVIDIA and Nova Technology

0.47

Correlation Coefficient

NVIDIA  Nova Technology

Very weak diversification

The 3 months correlation between NVIDIA and Nova is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Nova Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Technology 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 Nova Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Technology has no effect on the direction of NVIDIA i.e., NVIDIA and Nova Technology go up and down completely randomly.

Pair Corralation between NVIDIA and Nova Technology

Given the investment horizon of 90 days NVIDIA is expected to generate 1.27 times less return on investment than Nova Technology. In addition to that, NVIDIA is 1.66 times more volatile than Nova Technology. It trades about 0.06 of its total potential returns per unit of risk. Nova Technology is currently generating about 0.13 per unit of volatility. If you would invest  15,200  in Nova Technology on June 30, 2024 and sell it today you would earn a total of  850.00  from holding Nova Technology or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

NVIDIA  vs.  Nova Technology

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nova Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with NVIDIA and Nova Technology

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

The idea behind NVIDIA and Nova Technology 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.