Correlation Between Vuzix Corp and NVR

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

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

Diversification Opportunities for Vuzix Corp and NVR

-0.64

Correlation Coefficient

Vuzix Corp  NVR

Excellent diversification

The 3 months correlation between Vuzix and NVR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vuzix Corp Cmn and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc and Vuzix Corp 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 Vuzix Corp Cmn are associated (or correlated) with NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of Vuzix Corp i.e., Vuzix Corp and NVR go up and down completely randomly.

Pair Corralation between Vuzix Corp and NVR

Given the investment horizon of 90 days Vuzix Corp Cmn is expected to under-perform the NVR. In addition to that, Vuzix Corp is 4.11 times more volatile than NVR Inc. It trades about -0.03 of its total potential returns per unit of risk. NVR Inc is currently generating about -0.09 per unit of volatility. If you would invest  779,000  in NVR Inc on February 4, 2024 and sell it today you would lose (20,345) from holding NVR Inc or give up 2.61% of portfolio value over 90 days.

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

Vuzix Corp Cmn  vs.  NVR Inc

Vuzix Corp Cmn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vuzix Corp Cmn has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

NVR Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVR Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, NVR is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vuzix Corp and NVR

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

The idea behind Vuzix Corp Cmn and NVR Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.