Correlation Between NMI Holdings and CLOVER HEALTH

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

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

Diversification Opportunities for NMI Holdings and CLOVER HEALTH

0.12

Correlation Coefficient

NMI Holdings  CLOVER HEALTH

Average diversification

The 3 months correlation between NMI and CLOVER is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and CLOVER HEALTH INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLOVER HEALTH INV 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 CLOVER HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLOVER HEALTH INV has no effect on the direction of NMI Holdings i.e., NMI Holdings and CLOVER HEALTH go up and down completely randomly.

Pair Corralation between NMI Holdings and CLOVER HEALTH

Assuming the 90 days horizon NMI Holdings is expected to under-perform the CLOVER HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.59 times less risky than CLOVER HEALTH. The stock trades about -0.14 of its potential returns per unit of risk. The CLOVER HEALTH INV is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  311.00  in CLOVER HEALTH INV on October 8, 2024 and sell it today you would lose (11.00) from holding CLOVER HEALTH INV or give up 3.54% 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.  CLOVER HEALTH INV

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.

CLOVER HEALTH INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLOVER HEALTH INV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CLOVER HEALTH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMI Holdings and CLOVER HEALTH

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

The idea behind NMI Holdings and CLOVER HEALTH INV 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.