Correlation Between NVIDIA CDR and Gold Terra

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

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

Diversification Opportunities for NVIDIA CDR and Gold Terra

0.67

Correlation Coefficient

NVIDIA CDR  Gold Terra

Poor diversification

The 3 months correlation between NVIDIA and Gold is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR and Gold Terra Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Terra Resource 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 Gold Terra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Terra Resource has no effect on the direction of NVIDIA CDR i.e., NVIDIA CDR and Gold Terra go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Gold Terra

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 3.15 times less return on investment than Gold Terra. But when comparing it to its historical volatility, NVIDIA CDR is 3.57 times less risky than Gold Terra. It trades about 0.04 of its potential returns per unit of risk. Gold Terra Resource is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Gold Terra Resource on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Gold Terra Resource or generate 0.0% return on investment over 90 days.

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

NVIDIA CDR  vs.  Gold Terra Resource

NVIDIA CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gold Terra Resource

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Terra Resource are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gold Terra showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA CDR and Gold Terra

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

The idea behind NVIDIA CDR and Gold Terra Resource 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.