Correlation Between NVIDIA and International Business

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

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

Diversification Opportunities for NVIDIA and International Business

0.9

Correlation Coefficient

NVIDIA  International Business

Almost no diversification

The 3 months correlation between NVIDIA and International is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of NVIDIA i.e., NVIDIA and International Business go up and down completely randomly.

Pair Corralation between NVIDIA and International Business

Assuming the 90 days horizon NVIDIA is expected to generate 1.32 times more return on investment than International Business. However, NVIDIA is 1.32 times more volatile than International Business Machines. It trades about 0.39 of its potential returns per unit of risk. International Business Machines is currently generating about 0.15 per unit of risk. If you would invest  9,071  in NVIDIA on April 23, 2025 and sell it today you would earn a total of  5,741  from holding NVIDIA or generate 63.29% return on investment over 90 days.

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

NVIDIA  vs.  International Business Machine

NVIDIA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 30 (%) 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.

International Business

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, International Business reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and International Business

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

The idea behind NVIDIA and International Business Machines 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.