Correlation Between NMI Holdings and CryoLife

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

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

Diversification Opportunities for NMI Holdings and CryoLife

0.04

Correlation Coefficient

NMI Holdings  CryoLife

Significant diversification

The 3 months correlation between NMI and CryoLife is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife 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 CryoLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CryoLife has no effect on the direction of NMI Holdings i.e., NMI Holdings and CryoLife go up and down completely randomly.

Pair Corralation between NMI Holdings and CryoLife

Assuming the 90 days horizon NMI Holdings is expected to generate 1.4 times less return on investment than CryoLife. In addition to that, NMI Holdings is 1.05 times more volatile than CryoLife. It trades about 0.08 of its total potential returns per unit of risk. CryoLife is currently generating about 0.11 per unit of volatility. If you would invest  2,510  in CryoLife on October 6, 2024 and sell it today you would earn a total of  205.00  from holding CryoLife or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

NMI Holdings  vs.  CryoLife

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.

CryoLife

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and CryoLife

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

The idea behind NMI Holdings and CryoLife 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.