Correlation Between Homerun Resources and NVIDIA CDR

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

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

Diversification Opportunities for Homerun Resources and NVIDIA CDR

0.62

Correlation Coefficient

Homerun Resources  NVIDIA CDR

Poor diversification

The 3 months correlation between Homerun and NVIDIA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Homerun Resources and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and Homerun Resources 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 Homerun Resources 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 Homerun Resources i.e., Homerun Resources and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Homerun Resources and NVIDIA CDR

Assuming the 90 days horizon Homerun Resources is expected to under-perform the NVIDIA CDR. In addition to that, Homerun Resources is 2.35 times more volatile than NVIDIA CDR. It trades about -0.17 of its total potential returns per unit of risk. NVIDIA CDR is currently generating about 0.0 per unit of volatility. If you would invest  3,389  in NVIDIA CDR on October 6, 2024 and sell it today you would lose (17.00) from holding NVIDIA CDR or give up 0.5% of portfolio value over 90 days.

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

Homerun Resources  vs.  NVIDIA CDR

Homerun Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Homerun Resources is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 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 Homerun Resources and NVIDIA CDR

The main advantage of trading using opposite Homerun Resources and NVIDIA CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Homerun Resources 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 Homerun Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.