Correlation Between NMI Holdings and AutoZone

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

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

Diversification Opportunities for NMI Holdings and AutoZone

-0.35

Correlation Coefficient

NMI Holdings  AutoZone

Very good diversification

The 3 months correlation between NMI and AutoZone is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of NMI Holdings i.e., NMI Holdings and AutoZone go up and down completely randomly.

Pair Corralation between NMI Holdings and AutoZone

Assuming the 90 days horizon NMI Holdings is expected to under-perform the AutoZone. In addition to that, NMI Holdings is 1.26 times more volatile than AutoZone. It trades about -0.04 of its total potential returns per unit of risk. AutoZone is currently generating about 0.18 per unit of volatility. If you would invest  308,500  in AutoZone on December 29, 2024 and sell it today you would earn a total of  45,300  from holding AutoZone or generate 14.68% 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.  AutoZone

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.

AutoZone

Risk-Adjusted Performance

Good

Over the last 90 days AutoZone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, AutoZone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and AutoZone

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

The idea behind NMI Holdings and AutoZone 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.