Correlation Between NVIDIA and Lifestyle

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

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

Diversification Opportunities for NVIDIA and Lifestyle

0.94

Correlation Coefficient

NVIDIA  Lifestyle

Almost no diversification

The 3 months correlation between NVIDIA and Lifestyle is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Lifestyle Ii Aggressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestyle Ii Aggressive 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 Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestyle Ii Aggressive has no effect on the direction of NVIDIA i.e., NVIDIA and Lifestyle go up and down completely randomly.

Pair Corralation between NVIDIA and Lifestyle

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Lifestyle. In addition to that, NVIDIA is 3.38 times more volatile than Lifestyle Ii Aggressive. It trades about -0.13 of its total potential returns per unit of risk. Lifestyle Ii Aggressive is currently generating about -0.3 per unit of volatility. If you would invest  1,268  in Lifestyle Ii Aggressive on January 20, 2024 and sell it today you would lose (53.00) from holding Lifestyle Ii Aggressive or give up 4.18% of portfolio value over 90 days.

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

NVIDIA  vs.  Lifestyle Ii Aggressive

NVIDIA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 14 (%) 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.

Lifestyle Ii Aggressive

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lifestyle Ii Aggressive are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lifestyle 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 Lifestyle

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

The idea behind NVIDIA and Lifestyle Ii Aggressive 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.