Correlation Between NMI Holdings and Workiva

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

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

Diversification Opportunities for NMI Holdings and Workiva

-0.1

Correlation Coefficient

NMI Holdings  Workiva

Good diversification

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

Pair Corralation between NMI Holdings and Workiva

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Workiva. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.39 times less risky than Workiva. The stock trades about -0.29 of its potential returns per unit of risk. The Workiva is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,650  in Workiva on October 5, 2024 and sell it today you would earn a total of  950.00  from holding Workiva or generate 9.84% return on investment over 90 days.

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

NMI Holdings  vs.  Workiva

NMI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Workiva

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Workiva has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak forward-looking signals, Workiva reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Workiva

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

The idea behind NMI Holdings and Workiva 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.