Correlation Between NVIDIA and American Funds

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

By analyzing existing cross correlation between NVIDIA and American Funds 2010, you can compare the effects of market volatilities on NVIDIA and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and American Funds.

Diversification Opportunities for NVIDIA and American Funds

0.61

Correlation Coefficient

NVIDIA  American Funds

Poor diversification

The 3 months correlation between NVIDIA and American is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and American Funds 2010 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2010 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2010 has no effect on the direction of NVIDIA i.e., NVIDIA and American Funds go up and down completely randomly.

Pair Corralation between NVIDIA and American Funds

Given the investment horizon of 90 days NVIDIA is expected to generate 11.43 times more return on investment than American Funds. However, NVIDIA is 11.43 times more volatile than American Funds 2010. It trades about 0.11 of its potential returns per unit of risk. American Funds 2010 is currently generating about 0.17 per unit of risk. If you would invest  9,212  in NVIDIA on August 2, 2024 and sell it today you would earn a total of  4,722  from holding NVIDIA or generate 51.26% return on investment over 90 days.

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

NVIDIA  vs.  American Funds 2010

NVIDIA

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

American Funds 2010

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2010 are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and American Funds

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

The idea behind NVIDIA and American Funds 2010 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.