Correlation Between Canadian General and NVIDIA CDR

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

By analyzing existing cross correlation between Canadian General Investments and NVIDIA CDR, you can compare the effects of market volatilities on Canadian General and NVIDIA CDR 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 Canadian General with a short position of NVIDIA CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian General and NVIDIA CDR.

Diversification Opportunities for Canadian General and NVIDIA CDR

0.72

Correlation Coefficient

Canadian General  NVIDIA CDR

Poor diversification

The 3 months correlation between Canadian and NVIDIA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and Canadian General 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 Canadian General Investments are associated (or correlated) with NVIDIA CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA CDR has no effect on the direction of Canadian General i.e., Canadian General and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Canadian General and NVIDIA CDR

Assuming the 90 days trading horizon Canadian General Investments is expected to generate 0.34 times more return on investment than NVIDIA CDR. However, Canadian General Investments is 2.94 times less risky than NVIDIA CDR. It trades about 0.08 of its potential returns per unit of risk. NVIDIA CDR is currently generating about -0.17 per unit of risk. If you would invest  4,054  in Canadian General Investments on September 22, 2024 and sell it today you would earn a total of  50.00  from holding Canadian General Investments or generate 1.23% return on investment over 90 days.

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

Canadian General Investments  vs.  NVIDIA CDR

Canadian General Inv

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Canadian General is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

NVIDIA CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian General and NVIDIA CDR

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

The idea behind Canadian General Investments and NVIDIA CDR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..