Correlation Between NVIDIA CDR and Sabio Holdings

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

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

Diversification Opportunities for NVIDIA CDR and Sabio Holdings

-0.46

Correlation Coefficient

NVIDIA CDR  Sabio Holdings

Very good diversification

The 3 months correlation between NVIDIA and Sabio is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Sabio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabio Holdings 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 Sabio Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabio Holdings has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Sabio Holdings go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Sabio Holdings

Assuming the 90 days trading horizon NVIDIA CDR is expected to under-perform the Sabio Holdings. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA CDR is 1.13 times less risky than Sabio Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The Sabio Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Sabio Holdings on December 30, 2024 and sell it today you would earn a total of  11.00  from holding Sabio Holdings or generate 22.92% return on investment over 90 days.

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

NVIDIA CDR  vs.  Sabio Holdings

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 abnormal 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.

Sabio Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Sabio Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA CDR and Sabio Holdings

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

The idea behind NVIDIA CDR and Sabio Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.