Correlation Between NVIDIA and Canadian Utilities

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

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

Diversification Opportunities for NVIDIA and Canadian Utilities

-0.22

Correlation Coefficient

NVIDIA  Canadian Utilities

Very good diversification

The 3 months correlation between NVIDIA and Canadian is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of NVIDIA i.e., NVIDIA and Canadian Utilities go up and down completely randomly.

Pair Corralation between NVIDIA and Canadian Utilities

Given the investment horizon of 90 days NVIDIA is expected to generate 2.86 times more return on investment than Canadian Utilities. However, NVIDIA is 2.86 times more volatile than Canadian Utilities Ltd. It trades about 0.14 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about 0.02 per unit of risk. If you would invest  1,915  in NVIDIA on October 20, 2024 and sell it today you would earn a total of  11,856  from holding NVIDIA or generate 619.11% return on investment over 90 days.

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

NVIDIA  vs.  Canadian Utilities Ltd

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Canadian Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NVIDIA and Canadian Utilities

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

The idea behind NVIDIA and Canadian Utilities Ltd 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.