Correlation Between Converge Technology and NVIDIA CDR

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

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

Diversification Opportunities for Converge Technology and NVIDIA CDR

-0.6

Correlation Coefficient

Converge Technology  NVIDIA CDR

Excellent diversification

The 3 months correlation between Converge and NVIDIA is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Converge Technology Solutions and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and Converge Technology 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 Converge Technology Solutions 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 Converge Technology i.e., Converge Technology and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Converge Technology and NVIDIA CDR

Assuming the 90 days trading horizon Converge Technology Solutions is expected to under-perform the NVIDIA CDR. In addition to that, Converge Technology is 1.68 times more volatile than NVIDIA CDR. It trades about -0.08 of its total potential returns per unit of risk. NVIDIA CDR is currently generating about 0.19 per unit of volatility. If you would invest  2,498  in NVIDIA CDR on September 4, 2024 and sell it today you would earn a total of  776.00  from holding NVIDIA CDR or generate 31.06% return on investment over 90 days.

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

Converge Technology Solutions  vs.  NVIDIA CDR

Converge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Technology Solutions 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.

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.

Pair Trading with Converge Technology and NVIDIA CDR

The main advantage of trading using opposite Converge Technology and NVIDIA CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Converge Technology 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 Converge Technology Solutions 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.