Correlation Between Novan and NVIDIA

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

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

Diversification Opportunities for Novan and NVIDIA

0.0

Correlation Coefficient

Novan  NVIDIA

Pay attention - limited upside

The 3 months correlation between Novan and NVIDIA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Novan Inc and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA and Novan 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 Novan Inc 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 Novan i.e., Novan and NVIDIA go up and down completely randomly.

Pair Corralation between Novan and NVIDIA

If you would invest  61,614  in NVIDIA on January 25, 2024 and sell it today you would earn a total of  20,809  from holding NVIDIA or generate 33.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Novan Inc  vs.  NVIDIA

Novan Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Novan is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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

Pair Trading with Novan and NVIDIA

The main advantage of trading using opposite Novan and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novan 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 Novan Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.