Correlation Between NVIDIA and Cano Health

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

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

Diversification Opportunities for NVIDIA and Cano Health

-0.35

Correlation Coefficient

NVIDIA  Cano Health

Very good diversification

The 3 months correlation between NVIDIA and Cano is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Cano Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cano Health and NVIDIA 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 NVIDIA are associated (or correlated) with Cano Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cano Health has no effect on the direction of NVIDIA i.e., NVIDIA and Cano Health go up and down completely randomly.

Pair Corralation between NVIDIA and Cano Health

Given the investment horizon of 90 days NVIDIA is expected to generate 0.25 times more return on investment than Cano Health. However, NVIDIA is 4.02 times less risky than Cano Health. It trades about 0.17 of its potential returns per unit of risk. Cano Health is currently generating about 0.0 per unit of risk. If you would invest  77,659  in NVIDIA on February 28, 2024 and sell it today you would earn a total of  28,810  from holding NVIDIA or generate 37.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.75%
Values	Daily Returns

NVIDIA  vs.  Cano Health

NVIDIA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Cano Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cano Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cano Health is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NVIDIA and Cano Health

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

The idea behind NVIDIA and Cano Health 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.