Correlation Between NVIDIA CDR and GOLDMAN SACHS

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

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

Diversification Opportunities for NVIDIA CDR and GOLDMAN SACHS

0.63

Correlation Coefficient

NVIDIA CDR  GOLDMAN SACHS

Poor diversification

The 3 months correlation between NVIDIA and GOLDMAN is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR 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 GOLDMAN SACHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDMAN SACHS CDR has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and GOLDMAN SACHS go up and down completely randomly.

Pair Corralation between NVIDIA CDR and GOLDMAN SACHS

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 1.96 times more return on investment than GOLDMAN SACHS. However, NVIDIA CDR is 1.96 times more volatile than GOLDMAN SACHS CDR. It trades about 0.15 of its potential returns per unit of risk. GOLDMAN SACHS CDR is currently generating about 0.07 per unit of risk. If you would invest  375.00  in NVIDIA CDR on September 30, 2024 and sell it today you would earn a total of  2,825  from holding NVIDIA CDR or generate 753.33% return on investment over 90 days.

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

NVIDIA CDR  vs.  GOLDMAN SACHS CDR

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.

GOLDMAN SACHS CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, GOLDMAN SACHS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA CDR and GOLDMAN SACHS

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

The idea behind NVIDIA CDR and GOLDMAN SACHS 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.