Correlation Between NMI Holdings and PagerDuty

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

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

Diversification Opportunities for NMI Holdings and PagerDuty

0.1

Correlation Coefficient

NMI Holdings  PagerDuty

Average diversification

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

Pair Corralation between NMI Holdings and PagerDuty

Assuming the 90 days horizon NMI Holdings is expected to generate 0.88 times more return on investment than PagerDuty. However, NMI Holdings is 1.14 times less risky than PagerDuty. It trades about -0.29 of its potential returns per unit of risk. PagerDuty is currently generating about -0.46 per unit of risk. If you would invest  3,800  in NMI Holdings on October 5, 2024 and sell it today you would lose (300.00) from holding NMI Holdings or give up 7.89% of portfolio value over 90 days.

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

NMI Holdings  vs.  PagerDuty

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.

PagerDuty

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days PagerDuty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, PagerDuty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NMI Holdings and PagerDuty

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

The idea behind NMI Holdings and PagerDuty 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.