Correlation Between NVIDIA and CBOA Financial

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

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

Diversification Opportunities for NVIDIA and CBOA Financial

0.0

Correlation Coefficient

NVIDIA  CBOA Financial

Pay attention - limited upside

The 3 months correlation between NVIDIA and CBOA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and CBOA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBOA Financial and NVIDIA 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 are associated (or correlated) with CBOA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBOA Financial has no effect on the direction of NVIDIA i.e., NVIDIA and CBOA Financial go up and down completely randomly.

Pair Corralation between NVIDIA and CBOA Financial

Given the investment horizon of 90 days NVIDIA is expected to generate 0.96 times more return on investment than CBOA Financial. However, NVIDIA is 1.05 times less risky than CBOA Financial. It trades about 0.14 of its potential returns per unit of risk. CBOA Financial is currently generating about -0.03 per unit of risk. If you would invest  1,918  in NVIDIA on October 12, 2024 and sell it today you would earn a total of  12,093  from holding NVIDIA or generate 630.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	25.45%
Values	Daily Returns

NVIDIA  vs.  CBOA Financial

NVIDIA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CBOA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBOA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CBOA Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVIDIA and CBOA Financial

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

The idea behind NVIDIA and CBOA Financial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.