Correlation Between NVIDIA CDR and Magellan Aerospace

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

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

Diversification Opportunities for NVIDIA CDR and Magellan Aerospace

-0.03

Correlation Coefficient

NVIDIA CDR  Magellan Aerospace

Good diversification

The 3 months correlation between NVIDIA and Magellan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Magellan Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Aerospace 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 Magellan Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Aerospace has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Magellan Aerospace go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Magellan Aerospace

Assuming the 90 days trading horizon NVIDIA CDR is expected to under-perform the Magellan Aerospace. In addition to that, NVIDIA CDR is 1.52 times more volatile than Magellan Aerospace. It trades about -0.05 of its total potential returns per unit of risk. Magellan Aerospace is currently generating about 0.16 per unit of volatility. If you would invest  952.00  in Magellan Aerospace on December 24, 2024 and sell it today you would earn a total of  272.00  from holding Magellan Aerospace or generate 28.57% return on investment over 90 days.

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

NVIDIA CDR  vs.  Magellan Aerospace

NVIDIA CDR

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Magellan Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Aerospace are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Magellan Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA CDR and Magellan Aerospace

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

The idea behind NVIDIA CDR and Magellan Aerospace 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 Anywhere module to track or share privately all of your investments from the convenience of any device.