Correlation Between NVIDIA CDR and Caribbean Utilities

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

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

Diversification Opportunities for NVIDIA CDR and Caribbean Utilities

-0.59

Correlation Coefficient

NVIDIA CDR  Caribbean Utilities

Excellent diversification

The 3 months correlation between NVIDIA and Caribbean is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities and NVIDIA CDR 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 CDR are associated (or correlated) with Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Caribbean Utilities go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Caribbean Utilities

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 2.11 times more return on investment than Caribbean Utilities. However, NVIDIA CDR is 2.11 times more volatile than Caribbean Utilities. It trades about 0.11 of its potential returns per unit of risk. Caribbean Utilities is currently generating about -0.02 per unit of risk. If you would invest  2,792  in NVIDIA CDR on September 13, 2024 and sell it today you would earn a total of  422.00  from holding NVIDIA CDR or generate 15.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NVIDIA CDR  vs.  Caribbean Utilities

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 unfluctuating technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Caribbean Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribbean Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NVIDIA CDR and Caribbean Utilities

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

The idea behind NVIDIA CDR and Caribbean Utilities 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.