Correlation Between NVIDIA and Brixton Metals

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

By analyzing existing cross correlation between NVIDIA and Brixton Metals, you can compare the effects of market volatilities on NVIDIA and Brixton Metals 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 Brixton Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Brixton Metals.

Diversification Opportunities for NVIDIA and Brixton Metals

-0.1

Correlation Coefficient

NVIDIA  Brixton Metals

Good diversification

The 3 months correlation between NVIDIA and Brixton is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Brixton Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brixton Metals 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 Brixton Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brixton Metals has no effect on the direction of NVIDIA i.e., NVIDIA and Brixton Metals go up and down completely randomly.

Pair Corralation between NVIDIA and Brixton Metals

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Brixton Metals. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 1.42 times less risky than Brixton Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Brixton Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4.70  in Brixton Metals on November 28, 2024 and sell it today you would earn a total of  1.60  from holding Brixton Metals or generate 34.04% return on investment over 90 days.

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

NVIDIA  vs.  Brixton Metals

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Brixton Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brixton Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brixton Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Brixton Metals

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

The idea behind NVIDIA and Brixton Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.