Correlation Between NVIDIA CDR and Microbix Biosystems

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

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

Diversification Opportunities for NVIDIA CDR and Microbix Biosystems

-0.81

Correlation Coefficient

NVIDIA CDR  Microbix Biosystems

Pay attention - limited upside

The 3 months correlation between NVIDIA and Microbix is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Microbix Biosystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microbix Biosystems 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 Microbix Biosystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microbix Biosystems has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Microbix Biosystems go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Microbix Biosystems

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 1.21 times more return on investment than Microbix Biosystems. However, NVIDIA CDR is 1.21 times more volatile than Microbix Biosystems. It trades about 0.18 of its potential returns per unit of risk. Microbix Biosystems is currently generating about -0.17 per unit of risk. If you would invest  2,498  in NVIDIA CDR on September 4, 2024 and sell it today you would earn a total of  743.00  from holding NVIDIA CDR or generate 29.74% return on investment over 90 days.

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

NVIDIA CDR  vs.  Microbix Biosystems

NVIDIA CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 14 (%) 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.

Microbix Biosystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microbix Biosystems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NVIDIA CDR and Microbix Biosystems

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

The idea behind NVIDIA CDR and Microbix Biosystems 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.