Correlation Between NMI Holdings and Corning Incorporated

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

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

Diversification Opportunities for NMI Holdings and Corning Incorporated

-0.16

Correlation Coefficient

NMI Holdings  Corning Incorporated

Good diversification

The 3 months correlation between NMI and Corning is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Corning Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corning Incorporated 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 Corning Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corning Incorporated has no effect on the direction of NMI Holdings i.e., NMI Holdings and Corning Incorporated go up and down completely randomly.

Pair Corralation between NMI Holdings and Corning Incorporated

Assuming the 90 days horizon NMI Holdings is expected to generate 1.86 times less return on investment than Corning Incorporated. But when comparing it to its historical volatility, NMI Holdings is 1.2 times less risky than Corning Incorporated. It trades about 0.08 of its potential returns per unit of risk. Corning Incorporated is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,605  in Corning Incorporated on October 5, 2024 and sell it today you would earn a total of  1,988  from holding Corning Incorporated or generate 76.31% 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.  Corning Incorporated

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.

Corning Incorporated

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with NMI Holdings and Corning Incorporated

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

The idea behind NMI Holdings and Corning Incorporated 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.