Correlation Between NMI Holdings and Equitable Holdings

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

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

Diversification Opportunities for NMI Holdings and Equitable Holdings

0.39

Correlation Coefficient

NMI Holdings  Equitable Holdings

Weak diversification

The 3 months correlation between NMI and Equitable is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings 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 Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of NMI Holdings i.e., NMI Holdings and Equitable Holdings go up and down completely randomly.

Pair Corralation between NMI Holdings and Equitable Holdings

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Equitable Holdings. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.19 times less risky than Equitable Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Equitable Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,460  in Equitable Holdings on December 29, 2024 and sell it today you would earn a total of  400.00  from holding Equitable Holdings or generate 8.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NMI Holdings  vs.  Equitable Holdings

NMI Holdings

Risk-Adjusted Performance

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

Equitable Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Equitable Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NMI Holdings and Equitable Holdings

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

The idea behind NMI Holdings and Equitable Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.