Correlation Between NVIDIA CDR and Premium Income

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

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

Diversification Opportunities for NVIDIA CDR and Premium Income

-0.25

Correlation Coefficient

NVIDIA CDR  Premium Income

Very good diversification

The 3 months correlation between NVIDIA and Premium is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income 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 Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Premium Income go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Premium Income

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 2.16 times more return on investment than Premium Income. However, NVIDIA CDR is 2.16 times more volatile than Premium Income. It trades about 0.09 of its potential returns per unit of risk. Premium Income is currently generating about 0.04 per unit of risk. If you would invest  3,168  in NVIDIA CDR on September 28, 2024 and sell it today you would earn a total of  104.00  from holding NVIDIA CDR or generate 3.28% 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.  Premium Income

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 uncertain technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NVIDIA CDR and Premium Income

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

The idea behind NVIDIA CDR and Premium Income 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.