Correlation Between Premium Income and NVIDIA CDR

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

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

Diversification Opportunities for Premium Income and NVIDIA CDR

-0.21

Correlation Coefficient

Premium Income  NVIDIA CDR

Very good diversification

The 3 months correlation between Premium and NVIDIA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and Premium Income 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 Premium Income 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 Premium Income i.e., Premium Income and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Premium Income and NVIDIA CDR

Assuming the 90 days trading horizon Premium Income is expected to generate 0.46 times more return on investment than NVIDIA CDR. However, Premium Income is 2.15 times less risky than NVIDIA CDR. It trades about -0.14 of its potential returns per unit of risk. NVIDIA CDR is currently generating about -0.11 per unit of risk. If you would invest  621.00  in Premium Income on September 23, 2024 and sell it today you would lose (18.00) from holding Premium Income or give up 2.9% of portfolio value over 90 days.

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

Premium Income  vs.  NVIDIA CDR

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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 uncertain 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 Premium Income and NVIDIA CDR

The main advantage of trading using opposite Premium Income and NVIDIA CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Income 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 Premium Income 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.