Correlation Between IA Financial and NVIDIA CDR

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

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

Diversification Opportunities for IA Financial and NVIDIA CDR

0.03

Correlation Coefficient

IA Financial  NVIDIA CDR

Significant diversification

The 3 months correlation between IAG and NVIDIA is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and IA Financial 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 iA Financial 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 IA Financial i.e., IA Financial and NVIDIA CDR go up and down completely randomly.

Pair Corralation between IA Financial and NVIDIA CDR

Assuming the 90 days trading horizon iA Financial is expected to under-perform the NVIDIA CDR. But the stock apears to be less risky and, when comparing its historical volatility, iA Financial is 3.25 times less risky than NVIDIA CDR. The stock trades about -0.05 of its potential returns per unit of risk. The NVIDIA CDR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,150  in NVIDIA CDR on October 21, 2024 and sell it today you would earn a total of  62.00  from holding NVIDIA CDR or generate 1.97% return on investment over 90 days.

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

iA Financial  vs.  NVIDIA CDR

iA Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IA Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NVIDIA CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, NVIDIA CDR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IA Financial and NVIDIA CDR

The main advantage of trading using opposite IA Financial and NVIDIA CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial 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 iA Financial 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.