Correlation Between NVIDIA and Canadian Natural

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

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

Diversification Opportunities for NVIDIA and Canadian Natural

0.23

Correlation Coefficient

NVIDIA  Canadian Natural

Modest diversification

The 3 months correlation between NVIDIA and Canadian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Canadian Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Natural Res 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 Canadian Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Natural Res has no effect on the direction of NVIDIA i.e., NVIDIA and Canadian Natural go up and down completely randomly.

Pair Corralation between NVIDIA and Canadian Natural

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Canadian Natural. In addition to that, NVIDIA is 1.12 times more volatile than Canadian Natural Resources. It trades about -0.11 of its total potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.08 per unit of volatility. If you would invest  3,121  in Canadian Natural Resources on October 5, 2024 and sell it today you would lose (91.00) from holding Canadian Natural Resources or give up 2.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

NVIDIA  vs.  Canadian Natural Resources

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Canadian Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Natural 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 Canadian Natural

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

The idea behind NVIDIA and Canadian Natural Resources 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.