Correlation Between NMI Holdings and Vale SA
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Vale SA 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 Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Vale SA, you can compare the effects of market volatilities on NMI Holdings and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Vale SA.
Diversification Opportunities for NMI Holdings and Vale SA
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NMI and Vale is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of NMI Holdings i.e., NMI Holdings and Vale SA go up and down completely randomly.
Pair Corralation between NMI Holdings and Vale SA
Assuming the 90 days horizon NMI Holdings is expected to generate 0.8 times more return on investment than Vale SA. However, NMI Holdings is 1.25 times less risky than Vale SA. It trades about 0.08 of its potential returns per unit of risk. Vale SA is currently generating about -0.04 per unit of risk. If you would invest 1,960 in NMI Holdings on October 4, 2024 and sell it today you would earn a total of 1,540 from holding NMI Holdings or generate 78.57% 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. Vale SA
Performance |
Timeline |
NMI Holdings |
Vale SA |
NMI Holdings and Vale SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NMI Holdings and Vale SA
The main advantage of trading using opposite NMI Holdings and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.NMI Holdings vs. PURETECH HEALTH PLC | NMI Holdings vs. Wenzhou Kangning Hospital | NMI Holdings vs. LIFEWAY FOODS | NMI Holdings vs. Astral Foods Limited |
Vale SA vs. SOEDER SPORTFISKE AB | Vale SA vs. BJs Restaurants | Vale SA vs. Gaztransport Technigaz SA | Vale SA vs. PPHE HOTEL GROUP |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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