Correlation Between Microsoft CDR and Nvidia CDR
Can any of the company-specific risk be diversified away by investing in both Microsoft CDR 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 Microsoft CDR and Nvidia CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft CDR and Nvidia CDR, you can compare the effects of market volatilities on Microsoft CDR 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 Microsoft CDR with a short position of Nvidia CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft CDR and Nvidia CDR.
Diversification Opportunities for Microsoft CDR and Nvidia CDR
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Microsoft and Nvidia is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft CDR and Nvidia CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nvidia CDR and Microsoft CDR 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 Microsoft CDR 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 Microsoft CDR i.e., Microsoft CDR and Nvidia CDR go up and down completely randomly.
Pair Corralation between Microsoft CDR and Nvidia CDR
Assuming the 90 days trading horizon Microsoft CDR is expected to generate 1.65 times less return on investment than Nvidia CDR. But when comparing it to its historical volatility, Microsoft CDR is 1.31 times less risky than Nvidia CDR. It trades about 0.4 of its potential returns per unit of risk. Nvidia CDR is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 2,239 in Nvidia CDR on April 20, 2025 and sell it today you would earn a total of 1,719 from holding Nvidia CDR or generate 76.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft CDR vs. Nvidia CDR
Performance |
Timeline |
Microsoft CDR |
Nvidia CDR |
Microsoft CDR and Nvidia CDR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft CDR and Nvidia CDR
The main advantage of trading using opposite Microsoft CDR and Nvidia CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft CDR 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.Microsoft CDR vs. Canadian General Investments | Microsoft CDR vs. Advent Wireless | Microsoft CDR vs. CNJ Capital Investments | Microsoft CDR vs. TGS Esports |
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Check out your portfolio center.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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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