Correlation Between NVIDIA and Ucloudlink

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

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

Diversification Opportunities for NVIDIA and Ucloudlink

0.13

Correlation Coefficient

NVIDIA  Ucloudlink

Average diversification

The 3 months correlation between NVIDIA and Ucloudlink is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Ucloudlink Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ucloudlink Group 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 Ucloudlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ucloudlink Group has no effect on the direction of NVIDIA i.e., NVIDIA and Ucloudlink go up and down completely randomly.

Pair Corralation between NVIDIA and Ucloudlink

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Ucloudlink. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 3.95 times less risky than Ucloudlink. The stock trades about -0.03 of its potential returns per unit of risk. The Ucloudlink Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Ucloudlink Group on December 2, 2024 and sell it today you would lose (9.00) from holding Ucloudlink Group or give up 6.62% of portfolio value over 90 days.

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

NVIDIA  vs.  Ucloudlink Group

NVIDIA

Risk-Adjusted Performance

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.

Ucloudlink Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ucloudlink Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, Ucloudlink disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Ucloudlink

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

The idea behind NVIDIA and Ucloudlink Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.