Correlation Between NMI Holdings and Controladora Vuela

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

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

Diversification Opportunities for NMI Holdings and Controladora Vuela

-0.35

Correlation Coefficient

NMI Holdings  Controladora Vuela

Very good diversification

The 3 months correlation between NMI and Controladora is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Controladora Vuela Compaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Controladora Vuela Compaa 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 Controladora Vuela. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Controladora Vuela Compaa has no effect on the direction of NMI Holdings i.e., NMI Holdings and Controladora Vuela go up and down completely randomly.

Pair Corralation between NMI Holdings and Controladora Vuela

Assuming the 90 days horizon NMI Holdings is expected to generate 2.14 times less return on investment than Controladora Vuela. But when comparing it to its historical volatility, NMI Holdings is 1.12 times less risky than Controladora Vuela. It trades about 0.06 of its potential returns per unit of risk. Controladora Vuela Compaa is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  755.00  in Controladora Vuela Compaa on October 21, 2024 and sell it today you would earn a total of  60.00  from holding Controladora Vuela Compaa or generate 7.95% 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.  Controladora Vuela Compaa

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.

Controladora Vuela Compaa

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Controladora Vuela reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Controladora Vuela

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

The idea behind NMI Holdings and Controladora Vuela Compaa 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.