Correlation Between NVIDIA and SemiLEDS

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

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

Diversification Opportunities for NVIDIA and SemiLEDS

0.35

Correlation Coefficient

NVIDIA  SemiLEDS

Weak diversification

The 3 months correlation between NVIDIA and SemiLEDS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and SemiLEDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SemiLEDS 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 SemiLEDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SemiLEDS has no effect on the direction of NVIDIA i.e., NVIDIA and SemiLEDS go up and down completely randomly.

Pair Corralation between NVIDIA and SemiLEDS

Given the investment horizon of 90 days NVIDIA is expected to generate 0.38 times more return on investment than SemiLEDS. However, NVIDIA is 2.61 times less risky than SemiLEDS. It trades about 0.38 of its potential returns per unit of risk. SemiLEDS is currently generating about -0.03 per unit of risk. If you would invest  11,100  in NVIDIA on April 25, 2025 and sell it today you would earn a total of  5,978  from holding NVIDIA or generate 53.86% 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.  SemiLEDS

NVIDIA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 29 (%) 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.

SemiLEDS

Risk-Adjusted Performance

Very Weak

Over the last 90 days SemiLEDS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NVIDIA and SemiLEDS

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

The idea behind NVIDIA and SemiLEDS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.