Correlation Between Rocky Mountain and NVIDIA CDR

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

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

Diversification Opportunities for Rocky Mountain and NVIDIA CDR

-0.03

Correlation Coefficient

Rocky Mountain  NVIDIA CDR

Good diversification

The 3 months correlation between Rocky and NVIDIA is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and Rocky Mountain 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 Rocky Mountain Liquor are associated (or correlated) with NVIDIA CDR. 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 Rocky Mountain i.e., Rocky Mountain and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Rocky Mountain and NVIDIA CDR

Assuming the 90 days horizon Rocky Mountain Liquor is expected to under-perform the NVIDIA CDR. In addition to that, Rocky Mountain is 1.87 times more volatile than NVIDIA CDR. It trades about -0.08 of its total potential returns per unit of risk. NVIDIA CDR is currently generating about 0.1 per unit of volatility. If you would invest  2,991  in NVIDIA CDR on October 6, 2024 and sell it today you would earn a total of  381.00  from holding NVIDIA CDR or generate 12.74% return on investment over 90 days.

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

Rocky Mountain Liquor  vs.  NVIDIA CDR

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

NVIDIA CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Mountain and NVIDIA CDR

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

The idea behind Rocky Mountain Liquor 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 Global Correlations module to find global opportunities by holding instruments from different markets.