Correlation Between NMI Holdings and Commerzbank

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

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

Diversification Opportunities for NMI Holdings and Commerzbank

-0.18

Correlation Coefficient

NMI Holdings  Commerzbank

Good diversification

The 3 months correlation between NMI and Commerzbank is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG 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 Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of NMI Holdings i.e., NMI Holdings and Commerzbank go up and down completely randomly.

Pair Corralation between NMI Holdings and Commerzbank

Assuming the 90 days horizon NMI Holdings is expected to generate 1.04 times less return on investment than Commerzbank. But when comparing it to its historical volatility, NMI Holdings is 1.43 times less risky than Commerzbank. It trades about 0.08 of its potential returns per unit of risk. Commerzbank AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  904.00  in Commerzbank AG on October 4, 2024 and sell it today you would earn a total of  652.00  from holding Commerzbank AG or generate 72.12% 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.  Commerzbank AG

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.

Commerzbank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Commerzbank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NMI Holdings and Commerzbank

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

The idea behind NMI Holdings and Commerzbank AG 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 CEOs Directory module to screen CEOs from public companies around the world.