Correlation Between NMI Holdings and Hitachi Construction

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

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

Diversification Opportunities for NMI Holdings and Hitachi Construction

0.32

Correlation Coefficient

NMI Holdings  Hitachi Construction

Weak diversification

The 3 months correlation between NMI and Hitachi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of NMI Holdings i.e., NMI Holdings and Hitachi Construction go up and down completely randomly.

Pair Corralation between NMI Holdings and Hitachi Construction

Assuming the 90 days horizon NMI Holdings is expected to generate 11.74 times less return on investment than Hitachi Construction. In addition to that, NMI Holdings is 1.02 times more volatile than Hitachi Construction Machinery. It trades about 0.0 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.06 per unit of volatility. If you would invest  2,040  in Hitachi Construction Machinery on October 24, 2024 and sell it today you would earn a total of  120.00  from holding Hitachi Construction Machinery or generate 5.88% 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.  Hitachi Construction Machinery

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.

Hitachi Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hitachi Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NMI Holdings and Hitachi Construction

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

The idea behind NMI Holdings and Hitachi Construction Machinery 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..