Correlation Between NVIDIA and Marvell Technology

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

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

Diversification Opportunities for NVIDIA and Marvell Technology

0.26

Correlation Coefficient

NVIDIA  Marvell Technology

Modest diversification

The 3 months correlation between NVIDIA and Marvell is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Marvell Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology 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 Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of NVIDIA i.e., NVIDIA and Marvell Technology go up and down completely randomly.

Pair Corralation between NVIDIA and Marvell Technology

Given the investment horizon of 90 days NVIDIA is expected to generate 1.0 times more return on investment than Marvell Technology. However, NVIDIA is 1.0 times more volatile than Marvell Technology Group. It trades about 0.12 of its potential returns per unit of risk. Marvell Technology Group is currently generating about 0.01 per unit of risk. If you would invest  46,740  in NVIDIA on January 24, 2024 and sell it today you would earn a total of  32,778  from holding NVIDIA or generate 70.13% return on investment over 90 days.

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

NVIDIA  vs.  Marvell Technology Group

NVIDIA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 10 (%) 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.

Marvell Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marvell Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with NVIDIA and Marvell Technology

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

The idea behind NVIDIA and Marvell Technology Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.