Correlation Between NMI Holdings and ALD SA
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and ALD SA 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 ALD SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and ALD SA, you can compare the effects of market volatilities on NMI Holdings and ALD SA 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 ALD SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and ALD SA.
Diversification Opportunities for NMI Holdings and ALD SA
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NMI and ALD is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD 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 ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of NMI Holdings i.e., NMI Holdings and ALD SA go up and down completely randomly.
Pair Corralation between NMI Holdings and ALD SA
Assuming the 90 days horizon NMI Holdings is expected to under-perform the ALD SA. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.31 times less risky than ALD SA. The stock trades about -0.13 of its potential returns per unit of risk. The ALD SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 629.00 in ALD SA on December 18, 2024 and sell it today you would earn a total of 143.00 from holding ALD SA or generate 22.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NMI Holdings vs. ALD SA
Performance |
Timeline |
NMI Holdings |
ALD SA |
NMI Holdings and ALD SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NMI Holdings and ALD SA
The main advantage of trading using opposite NMI Holdings and ALD SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, ALD SA 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 ALD SA will offset losses from the drop in ALD SA's long position.NMI Holdings vs. STRAYER EDUCATION | NMI Holdings vs. SERI INDUSTRIAL EO | NMI Holdings vs. AIR PRODCHEMICALS | NMI Holdings vs. GALENA MINING LTD |
ALD SA vs. INDO RAMA SYNTHETIC | ALD SA vs. Silicon Motion Technology | ALD SA vs. Sekisui Chemical Co | ALD SA vs. Check Point Software |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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