Correlation Between NVIDIA and Zenith Minerals

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

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

Diversification Opportunities for NVIDIA and Zenith Minerals

-0.12

Correlation Coefficient

NVIDIA  Zenith Minerals

Good diversification

The 3 months correlation between NVIDIA and Zenith is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Zenith Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zenith Minerals 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 Zenith Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zenith Minerals has no effect on the direction of NVIDIA i.e., NVIDIA and Zenith Minerals go up and down completely randomly.

Pair Corralation between NVIDIA and Zenith Minerals

Given the investment horizon of 90 days NVIDIA is expected to generate 1.02 times more return on investment than Zenith Minerals. However, NVIDIA is 1.02 times more volatile than Zenith Minerals. It trades about 0.04 of its potential returns per unit of risk. Zenith Minerals is currently generating about -0.13 per unit of risk. If you would invest  13,990  in NVIDIA on October 6, 2024 and sell it today you would earn a total of  457.00  from holding NVIDIA or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

NVIDIA  vs.  Zenith Minerals

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 7 (%) 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.

Zenith Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zenith Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NVIDIA and Zenith Minerals

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

The idea behind NVIDIA and Zenith Minerals 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.