Correlation Between NVIDIA CDR and Edgewater Wireless

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

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

Diversification Opportunities for NVIDIA CDR and Edgewater Wireless

0.21

Correlation Coefficient

NVIDIA CDR  Edgewater Wireless

Modest diversification

The 3 months correlation between NVIDIA and Edgewater is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Edgewater Wireless Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewater Wireless 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 Edgewater Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewater Wireless has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Edgewater Wireless go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Edgewater Wireless

Assuming the 90 days trading horizon NVIDIA CDR is expected to under-perform the Edgewater Wireless. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA CDR is 2.33 times less risky than Edgewater Wireless. The stock trades about -0.03 of its potential returns per unit of risk. The Edgewater Wireless Systems is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Edgewater Wireless Systems on December 25, 2024 and sell it today you would earn a total of  2.00  from holding Edgewater Wireless Systems or generate 33.33% return on investment over 90 days.

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

NVIDIA CDR  vs.  Edgewater Wireless Systems

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 unfluctuating 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.

Edgewater Wireless

Risk-Adjusted Performance

OK

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

Pair Trading with NVIDIA CDR and Edgewater Wireless

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

The idea behind NVIDIA CDR and Edgewater Wireless Systems 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .