Correlation Between NMI Holdings and CTS Eventim

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

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

Diversification Opportunities for NMI Holdings and CTS Eventim

-0.4

Correlation Coefficient

NMI Holdings  CTS Eventim

Very good diversification

The 3 months correlation between NMI and CTS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and CTS Eventim AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Eventim AG 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 CTS Eventim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Eventim AG has no effect on the direction of NMI Holdings i.e., NMI Holdings and CTS Eventim go up and down completely randomly.

Pair Corralation between NMI Holdings and CTS Eventim

Assuming the 90 days horizon NMI Holdings is expected to under-perform the CTS Eventim. In addition to that, NMI Holdings is 1.08 times more volatile than CTS Eventim AG. It trades about -0.08 of its total potential returns per unit of risk. CTS Eventim AG is currently generating about 0.25 per unit of volatility. If you would invest  8,215  in CTS Eventim AG on December 20, 2024 and sell it today you would earn a total of  1,945  from holding CTS Eventim AG or generate 23.68% return on investment over 90 days.

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

NMI Holdings  vs.  CTS Eventim AG

NMI Holdings

Risk-Adjusted Performance

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.

CTS Eventim AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Eventim AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, CTS Eventim unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and CTS Eventim

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

The idea behind NMI Holdings and CTS Eventim AG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.