Correlation Between NVIDIA and RiverNorth Specialty

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

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

Diversification Opportunities for NVIDIA and RiverNorth Specialty

0.76

Correlation Coefficient

NVIDIA  RiverNorth Specialty

Poor diversification

The 3 months correlation between NVIDIA and RiverNorth is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and RiverNorth Specialty Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverNorth Specialty 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 RiverNorth Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverNorth Specialty has no effect on the direction of NVIDIA i.e., NVIDIA and RiverNorth Specialty go up and down completely randomly.

Pair Corralation between NVIDIA and RiverNorth Specialty

Given the investment horizon of 90 days NVIDIA is expected to generate 6.36 times more return on investment than RiverNorth Specialty. However, NVIDIA is 6.36 times more volatile than RiverNorth Specialty Finance. It trades about 0.13 of its potential returns per unit of risk. RiverNorth Specialty Finance is currently generating about 0.02 per unit of risk. If you would invest  9,038  in NVIDIA on August 9, 2024 and sell it today you would earn a total of  5,523  from holding NVIDIA or generate 61.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

NVIDIA  vs.  RiverNorth Specialty Finance

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.

RiverNorth Specialty

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in RiverNorth Specialty Finance are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, RiverNorth Specialty is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NVIDIA and RiverNorth Specialty

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

The idea behind NVIDIA and RiverNorth Specialty Finance 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.