Correlation Between NMI Holdings and Copart

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

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

Diversification Opportunities for NMI Holdings and Copart

0.21

Correlation Coefficient

NMI Holdings  Copart

Modest diversification

The 3 months correlation between NMI and Copart is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc 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 Copart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copart Inc has no effect on the direction of NMI Holdings i.e., NMI Holdings and Copart go up and down completely randomly.

Pair Corralation between NMI Holdings and Copart

Assuming the 90 days horizon NMI Holdings is expected to generate 2.24 times less return on investment than Copart. But when comparing it to its historical volatility, NMI Holdings is 1.44 times less risky than Copart. It trades about 0.08 of its potential returns per unit of risk. Copart Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,854  in Copart Inc on October 6, 2024 and sell it today you would earn a total of  610.00  from holding Copart Inc or generate 12.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NMI Holdings  vs.  Copart Inc

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.

Copart Inc

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with NMI Holdings and Copart

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

The idea behind NMI Holdings and Copart Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.