Correlation Between NVIDIA and Analog Devices
Can any of the company-specific risk be diversified away by investing in both NVIDIA and Analog Devices 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 Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Analog Devices, you can compare the effects of market volatilities on NVIDIA and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Analog Devices.
Diversification Opportunities for NVIDIA and Analog Devices
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NVIDIA and Analog is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of NVIDIA i.e., NVIDIA and Analog Devices go up and down completely randomly.
Pair Corralation between NVIDIA and Analog Devices
Given the investment horizon of 90 days NVIDIA is expected to under-perform the Analog Devices. In addition to that, NVIDIA is 1.65 times more volatile than Analog Devices. It trades about -0.24 of its total potential returns per unit of risk. Analog Devices is currently generating about -0.14 per unit of volatility. If you would invest 19,432 in Analog Devices on January 20, 2024 and sell it today you would lose (1,096) from holding Analog Devices or give up 5.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Analog Devices
Performance |
| Timeline |
| NVIDIA |
| Analog Devices |
NVIDIA and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Analog Devices
The main advantage of trading using opposite NVIDIA and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |