Correlation Between NVIDIA CDR and Gildan Activewear

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

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

Diversification Opportunities for NVIDIA CDR and Gildan Activewear

0.84

Correlation Coefficient

NVIDIA CDR  Gildan Activewear

Very poor diversification

The 3 months correlation between NVIDIA and Gildan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear 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 Gildan Activewear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gildan Activewear has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Gildan Activewear go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Gildan Activewear

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 2.55 times more return on investment than Gildan Activewear. However, NVIDIA CDR is 2.55 times more volatile than Gildan Activewear. It trades about 0.1 of its potential returns per unit of risk. Gildan Activewear is currently generating about 0.23 per unit of risk. If you would invest  2,795  in NVIDIA CDR on September 12, 2024 and sell it today you would earn a total of  360.00  from holding NVIDIA CDR or generate 12.88% return on investment over 90 days.

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

NVIDIA CDR  vs.  Gildan Activewear

NVIDIA CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gildan Activewear

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Gildan Activewear may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NVIDIA CDR and Gildan Activewear

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

The idea behind NVIDIA CDR and Gildan Activewear 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.