Correlation Between NMI Holdings and Cintas

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

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

Diversification Opportunities for NMI Holdings and Cintas

0.26

Correlation Coefficient

NMI Holdings  Cintas

Modest diversification

The 3 months correlation between NMI and Cintas is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas 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 Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of NMI Holdings i.e., NMI Holdings and Cintas go up and down completely randomly.

Pair Corralation between NMI Holdings and Cintas

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Cintas. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.17 times less risky than Cintas. The stock trades about -0.04 of its potential returns per unit of risk. The Cintas is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  18,665  in Cintas on October 6, 2024 and sell it today you would lose (935.00) from holding Cintas or give up 5.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

NMI Holdings  vs.  Cintas

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.

Cintas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cintas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cintas 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 Cintas

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

The idea behind NMI Holdings and Cintas 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.