Correlation Between NVIDIA and Bell Copper

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

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

Diversification Opportunities for NVIDIA and Bell Copper

-0.5

Correlation Coefficient

NVIDIA  Bell Copper

Very good diversification

The 3 months correlation between NVIDIA and Bell is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Bell Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bell Copper 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 Bell Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bell Copper has no effect on the direction of NVIDIA i.e., NVIDIA and Bell Copper go up and down completely randomly.

Pair Corralation between NVIDIA and Bell Copper

Given the investment horizon of 90 days NVIDIA is expected to generate 2.74 times less return on investment than Bell Copper. But when comparing it to its historical volatility, NVIDIA is 4.86 times less risky than Bell Copper. It trades about 0.05 of its potential returns per unit of risk. Bell Copper is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5.60  in Bell Copper on September 22, 2024 and sell it today you would lose (3.51) from holding Bell Copper or give up 62.68% of portfolio value over 90 days.

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

NVIDIA  vs.  Bell Copper

NVIDIA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 8 (%) 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.

Bell Copper

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bell Copper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Bell Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Bell Copper

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

The idea behind NVIDIA and Bell Copper 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.