Correlation Between POET Technologies and NVIDIACDR

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

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

Diversification Opportunities for POET Technologies and NVIDIACDR

0.38

Correlation Coefficient

POET Technologies  NVIDIACDR

Weak diversification

The 3 months correlation between POET and NVIDIACDR is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding POET Technologies and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and POET Technologies 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 POET Technologies are associated (or correlated) with NVIDIACDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA CDR has no effect on the direction of POET Technologies i.e., POET Technologies and NVIDIACDR go up and down completely randomly.

Pair Corralation between POET Technologies and NVIDIACDR

Assuming the 90 days horizon POET Technologies is expected to generate 1.68 times more return on investment than NVIDIACDR. However, POET Technologies is 1.68 times more volatile than NVIDIA CDR. It trades about -0.01 of its potential returns per unit of risk. NVIDIA CDR is currently generating about -0.03 per unit of risk. If you would invest  693.00  in POET Technologies on December 2, 2024 and sell it today you would lose (114.00) from holding POET Technologies or give up 16.45% of portfolio value over 90 days.

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

POET Technologies  vs.  NVIDIA CDR

POET Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days POET Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, POET Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

NVIDIA CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with POET Technologies and NVIDIACDR

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

The idea behind POET Technologies and NVIDIA CDR 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.