Correlation Between Infineon Technologies and NVIDIA

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

By analyzing existing cross correlation between Infineon Technologies AG and NVIDIA, you can compare the effects of market volatilities on Infineon Technologies and NVIDIA 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 Infineon Technologies with a short position of NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infineon Technologies and NVIDIA.

Diversification Opportunities for Infineon Technologies and NVIDIA

-0.37

Correlation Coefficient

Infineon Technologies  NVIDIA

Very good diversification

The 3 months correlation between Infineon and NVIDIA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Infineon Technologies AG and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Infineon Technologies 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 Infineon Technologies AG are associated (or correlated) with NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Infineon Technologies i.e., Infineon Technologies and NVIDIA go up and down completely randomly.

Pair Corralation between Infineon Technologies and NVIDIA

Assuming the 90 days horizon Infineon Technologies is expected to generate 4.53 times less return on investment than NVIDIA. But when comparing it to its historical volatility, Infineon Technologies AG is 1.09 times less risky than NVIDIA. It trades about 0.03 of its potential returns per unit of risk. NVIDIA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18,820  in NVIDIA on January 25, 2024 and sell it today you would earn a total of  63,603  from holding NVIDIA or generate 337.95% return on investment over 90 days.

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

Infineon Technologies AG  vs.  NVIDIA

Infineon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infineon Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NVIDIA

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Infineon Technologies and NVIDIA

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

The idea behind Infineon Technologies AG and NVIDIA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..