Correlation Between NMI Holdings and Grupo México

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

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

Diversification Opportunities for NMI Holdings and Grupo México

0.22

Correlation Coefficient

NMI Holdings  Grupo México

Modest diversification

The 3 months correlation between NMI and Grupo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Grupo Mxico SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Mxico SAB 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 Grupo México. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Mxico SAB has no effect on the direction of NMI Holdings i.e., NMI Holdings and Grupo México go up and down completely randomly.

Pair Corralation between NMI Holdings and Grupo México

Assuming the 90 days horizon NMI Holdings is expected to generate 3.68 times less return on investment than Grupo México. But when comparing it to its historical volatility, NMI Holdings is 2.64 times less risky than Grupo México. It trades about 0.08 of its potential returns per unit of risk. Grupo Mxico SAB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Grupo Mxico SAB on October 6, 2024 and sell it today you would earn a total of  286.00  from holding Grupo Mxico SAB or generate 158.89% return on investment over 90 days.

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

NMI Holdings  vs.  Grupo Mxico SAB

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Grupo Mxico SAB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Mxico SAB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grupo México reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Grupo México

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

The idea behind NMI Holdings and Grupo Mxico SAB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.