Correlation Between NMI Holdings and AmerisourceBergen

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

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

Diversification Opportunities for NMI Holdings and AmerisourceBergen

-0.02

Correlation Coefficient

NMI Holdings  AmerisourceBergen

Good diversification

The 3 months correlation between NMI and AmerisourceBergen is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen 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 AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of NMI Holdings i.e., NMI Holdings and AmerisourceBergen go up and down completely randomly.

Pair Corralation between NMI Holdings and AmerisourceBergen

Assuming the 90 days horizon NMI Holdings is expected to generate 1.18 times more return on investment than AmerisourceBergen. However, NMI Holdings is 1.18 times more volatile than AmerisourceBergen. It trades about 0.08 of its potential returns per unit of risk. AmerisourceBergen is currently generating about 0.05 per unit of risk. If you would invest  2,600  in NMI Holdings on October 5, 2024 and sell it today you would earn a total of  900.00  from holding NMI Holdings or generate 34.62% return on investment over 90 days.

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

NMI Holdings  vs.  AmerisourceBergen

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.

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AmerisourceBergen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, AmerisourceBergen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NMI Holdings and AmerisourceBergen

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

The idea behind NMI Holdings and AmerisourceBergen 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.