Correlation Between NVIDIA CDR and Exco Technologies

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

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

Diversification Opportunities for NVIDIA CDR and Exco Technologies

0.74

Correlation Coefficient

NVIDIA CDR  Exco Technologies

Poor diversification

The 3 months correlation between NVIDIA and Exco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Exco Technologies go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Exco Technologies

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 3.0 times more return on investment than Exco Technologies. However, NVIDIA CDR is 3.0 times more volatile than Exco Technologies Limited. It trades about -0.05 of its potential returns per unit of risk. Exco Technologies Limited is currently generating about -0.27 per unit of risk. If you would invest  3,272  in NVIDIA CDR on December 24, 2024 and sell it today you would lose (548.00) from holding NVIDIA CDR or give up 16.75% of portfolio value over 90 days.

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

NVIDIA CDR  vs.  Exco Technologies Limited

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.

Exco Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exco Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NVIDIA CDR and Exco Technologies

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

The idea behind NVIDIA CDR and Exco Technologies Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..