Correlation Between D Wave and CPI Card

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

By analyzing existing cross correlation between D Wave Quantum and CPI Card Group, you can compare the effects of market volatilities on D Wave and CPI Card 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 D Wave with a short position of CPI Card. Check out your portfolio center. Please also check ongoing floating volatility patterns of D Wave and CPI Card.

Diversification Opportunities for D Wave and CPI Card

0.78

Correlation Coefficient

D Wave  CPI Card

Poor diversification

The 3 months correlation between QBTS and CPI is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding D Wave Quantum and CPI Card Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Card Group and D Wave 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 D Wave Quantum are associated (or correlated) with CPI Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Card Group has no effect on the direction of D Wave i.e., D Wave and CPI Card go up and down completely randomly.

Pair Corralation between D Wave and CPI Card

Given the investment horizon of 90 days D Wave Quantum is expected to generate 3.74 times more return on investment than CPI Card. However, D Wave is 3.74 times more volatile than CPI Card Group. It trades about 0.33 of its potential returns per unit of risk. CPI Card Group is currently generating about 0.08 per unit of risk. If you would invest  98.00  in D Wave Quantum on September 30, 2024 and sell it today you would earn a total of  893.00  from holding D Wave Quantum or generate 911.22% return on investment over 90 days.

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

D Wave Quantum  vs.  CPI Card Group

D Wave Quantum

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in D Wave Quantum are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, D Wave unveiled solid returns over the last few months and may actually be approaching a breakup point.

CPI Card Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Card Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CPI Card unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with D Wave and CPI Card

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

The idea behind D Wave Quantum and CPI Card 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.