Correlation Between NVIDIA and Alphabet

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

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

Diversification Opportunities for NVIDIA and Alphabet

0.85

Correlation Coefficient

NVIDIA  Alphabet

Very poor diversification

The 3 months correlation between NVIDIA and Alphabet is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of NVIDIA i.e., NVIDIA and Alphabet go up and down completely randomly.

Pair Corralation between NVIDIA and Alphabet

Assuming the 90 days horizon NVIDIA is expected to generate 1.04 times more return on investment than Alphabet. However, NVIDIA is 1.04 times more volatile than Alphabet Class A. It trades about 0.36 of its potential returns per unit of risk. Alphabet Class A is currently generating about 0.14 per unit of risk. If you would invest  9,348  in NVIDIA on April 24, 2025 and sell it today you would earn a total of  5,302  from holding NVIDIA or generate 56.72% return on investment over 90 days.

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

NVIDIA  vs.  Alphabet Class A

NVIDIA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NVIDIA reported solid returns over the last few months and may actually be approaching a breakup point.

Alphabet Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Alphabet

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

The idea behind NVIDIA and Alphabet Class A 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.