Correlation Between NMI Holdings and CanSino Biologics

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

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

Diversification Opportunities for NMI Holdings and CanSino Biologics

-0.26

Correlation Coefficient

NMI Holdings  CanSino Biologics

Very good diversification

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

Pair Corralation between NMI Holdings and CanSino Biologics

Assuming the 90 days horizon NMI Holdings is expected to generate 0.35 times more return on investment than CanSino Biologics. However, NMI Holdings is 2.83 times less risky than CanSino Biologics. It trades about 0.08 of its potential returns per unit of risk. CanSino Biologics is currently generating about 0.0 per unit of risk. If you would invest  2,040  in NMI Holdings on October 5, 2024 and sell it today you would earn a total of  1,460  from holding NMI Holdings or generate 71.57% 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.  CanSino Biologics

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.

CanSino Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind NMI Holdings and CanSino Biologics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.