Correlation Between NVIDIACDR and Quantum Numbers

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

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

Diversification Opportunities for NVIDIACDR and Quantum Numbers

0.12

Correlation Coefficient

NVIDIACDR  Quantum Numbers

Average diversification

The 3 months correlation between NVIDIACDR and Quantum is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Quantum Numbers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum Numbers and NVIDIACDR 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 Quantum Numbers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum Numbers has no effect on the direction of NVIDIACDR i.e., NVIDIACDR and Quantum Numbers go up and down completely randomly.

Pair Corralation between NVIDIACDR and Quantum Numbers

Assuming the 90 days trading horizon NVIDIA CDR is expected to under-perform the Quantum Numbers. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA CDR is 7.41 times less risky than Quantum Numbers. The stock trades about -0.03 of its potential returns per unit of risk. The Quantum Numbers is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Quantum Numbers on December 2, 2024 and sell it today you would earn a total of  50.00  from holding Quantum Numbers or generate 277.78% return on investment over 90 days.

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

NVIDIA CDR  vs.  Quantum Numbers

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 latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Quantum Numbers

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum Numbers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Quantum Numbers showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIACDR and Quantum Numbers

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

The idea behind NVIDIA CDR and Quantum Numbers 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.