Correlation Between NMI Holdings and Cofina SGPS

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

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

Diversification Opportunities for NMI Holdings and Cofina SGPS

0.33

Correlation Coefficient

NMI Holdings  Cofina SGPS

Weak diversification

The 3 months correlation between NMI and Cofina is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Cofina SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofina SGPS SA 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 Cofina SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofina SGPS SA has no effect on the direction of NMI Holdings i.e., NMI Holdings and Cofina SGPS go up and down completely randomly.

Pair Corralation between NMI Holdings and Cofina SGPS

Assuming the 90 days horizon NMI Holdings is expected to generate 11.08 times less return on investment than Cofina SGPS. But when comparing it to its historical volatility, NMI Holdings is 9.93 times less risky than Cofina SGPS. It trades about 0.07 of its potential returns per unit of risk. Cofina SGPS SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,840  in Cofina SGPS SA on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Cofina SGPS SA or generate 0.0% return on investment over 90 days.

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

NMI Holdings  vs.  Cofina SGPS SA

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 nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cofina SGPS SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cofina SGPS SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cofina SGPS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Cofina SGPS

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

The idea behind NMI Holdings and Cofina SGPS SA 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.