Correlation Between NMI Holdings and Hutchison Telecommunicatio

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

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

Diversification Opportunities for NMI Holdings and Hutchison Telecommunicatio

0.08

Correlation Coefficient

NMI Holdings  Hutchison Telecommunicatio

Significant diversification

The 3 months correlation between NMI and Hutchison is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Hutchison Telecommunications H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio 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 Hutchison Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Telecommunicatio has no effect on the direction of NMI Holdings i.e., NMI Holdings and Hutchison Telecommunicatio go up and down completely randomly.

Pair Corralation between NMI Holdings and Hutchison Telecommunicatio

Assuming the 90 days horizon NMI Holdings is expected to generate 5.06 times less return on investment than Hutchison Telecommunicatio. But when comparing it to its historical volatility, NMI Holdings is 5.7 times less risky than Hutchison Telecommunicatio. It trades about 0.08 of its potential returns per unit of risk. Hutchison Telecommunications Hong is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.66  in Hutchison Telecommunications Hong on October 9, 2024 and sell it today you would earn a total of  5.34  from holding Hutchison Telecommunications Hong or generate 114.59% 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.  Hutchison Telecommunications H

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.

Hutchison Telecommunicatio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hutchison Telecommunications Hong are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hutchison Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Hutchison Telecommunicatio

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

The idea behind NMI Holdings and Hutchison Telecommunications Hong 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.