Correlation Between NVIDIA CDR and NFI

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

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

Diversification Opportunities for NVIDIA CDR and NFI

-0.81

Correlation Coefficient

NVIDIA CDR  NFI

Pay attention - limited upside

The 3 months correlation between NVIDIA and NFI is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group 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 NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and NFI go up and down completely randomly.

Pair Corralation between NVIDIA CDR and NFI

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 1.44 times more return on investment than NFI. However, NVIDIA CDR is 1.44 times more volatile than NFI Group. It trades about 0.17 of its potential returns per unit of risk. NFI Group is currently generating about -0.24 per unit of risk. If you would invest  2,537  in NVIDIA CDR on September 2, 2024 and sell it today you would earn a total of  703.00  from holding NVIDIA CDR or generate 27.71% return on investment over 90 days.

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

NVIDIA CDR  vs.  NFI Group

NVIDIA CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 13 (%) 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.

NFI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NFI Group 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 forward 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.

Pair Trading with NVIDIA CDR and NFI

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

The idea behind NVIDIA CDR and NFI Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.