Correlation Between NMI Holdings and VERTIV HOLCL

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

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

Diversification Opportunities for NMI Holdings and VERTIV HOLCL

0.01

Correlation Coefficient

NMI Holdings  VERTIV HOLCL

Significant diversification

The 3 months correlation between NMI and VERTIV is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and VERTIV HOLCL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERTIV HOLCL A 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 VERTIV HOLCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERTIV HOLCL A has no effect on the direction of NMI Holdings i.e., NMI Holdings and VERTIV HOLCL go up and down completely randomly.

Pair Corralation between NMI Holdings and VERTIV HOLCL

Assuming the 90 days horizon NMI Holdings is expected to generate 4.03 times less return on investment than VERTIV HOLCL. But when comparing it to its historical volatility, NMI Holdings is 2.77 times less risky than VERTIV HOLCL. It trades about 0.08 of its potential returns per unit of risk. VERTIV HOLCL A is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,407  in VERTIV HOLCL A on October 5, 2024 and sell it today you would earn a total of  10,095  from holding VERTIV HOLCL A or generate 717.48% return on investment over 90 days.

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

NMI Holdings  vs.  VERTIV HOLCL A

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.

VERTIV HOLCL A

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days VERTIV HOLCL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, VERTIV HOLCL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and VERTIV HOLCL

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

The idea behind NMI Holdings and VERTIV HOLCL A 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.