Correlation Between NMI Holdings and Genuine Parts

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

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

Diversification Opportunities for NMI Holdings and Genuine Parts

0.6

Correlation Coefficient

NMI Holdings  Genuine Parts

Poor diversification

The 3 months correlation between NMI and Genuine is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Genuine Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of NMI Holdings i.e., NMI Holdings and Genuine Parts go up and down completely randomly.

Pair Corralation between NMI Holdings and Genuine Parts

Assuming the 90 days horizon NMI Holdings is expected to generate 0.56 times more return on investment than Genuine Parts. However, NMI Holdings is 1.79 times less risky than Genuine Parts. It trades about 0.03 of its potential returns per unit of risk. Genuine Parts is currently generating about -0.01 per unit of risk. If you would invest  3,680  in NMI Holdings on September 4, 2024 and sell it today you would earn a total of  80.00  from holding NMI Holdings or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

NMI Holdings  vs.  Genuine Parts

NMI Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Genuine Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genuine Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genuine Parts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMI Holdings and Genuine Parts

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

The idea behind NMI Holdings and Genuine Parts 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.