Correlation Between Western Copper and NVIDIA CDR

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

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

Diversification Opportunities for Western Copper and NVIDIA CDR

-0.26

Correlation Coefficient

Western Copper  NVIDIA CDR

Very good diversification

The 3 months correlation between Western and NVIDIA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR and Western Copper 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 Western Copper and 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 Western Copper i.e., Western Copper and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Western Copper and NVIDIA CDR

Assuming the 90 days trading horizon Western Copper and is expected to under-perform the NVIDIA CDR. In addition to that, Western Copper is 1.13 times more volatile than NVIDIA CDR. It trades about -0.07 of its total potential returns per unit of risk. NVIDIA CDR is currently generating about 0.11 per unit of volatility. If you would invest  2,731  in NVIDIA CDR on September 23, 2024 and sell it today you would earn a total of  419.00  from holding NVIDIA CDR or generate 15.34% return on investment over 90 days.

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

Western Copper and  vs.  NVIDIA CDR

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

NVIDIA CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain 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 Western Copper and NVIDIA CDR

The main advantage of trading using opposite Western Copper and NVIDIA CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper 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 Western Copper and 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.