Correlation Between NMI Holdings and Welltower

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

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

Diversification Opportunities for NMI Holdings and Welltower

-0.23

Correlation Coefficient

NMI Holdings  Welltower

Very good diversification

The 3 months correlation between NMI and Welltower is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of NMI Holdings i.e., NMI Holdings and Welltower go up and down completely randomly.

Pair Corralation between NMI Holdings and Welltower

Assuming the 90 days horizon NMI Holdings is expected to generate 3.4 times less return on investment than Welltower. In addition to that, NMI Holdings is 1.4 times more volatile than Welltower. It trades about 0.01 of its total potential returns per unit of risk. Welltower is currently generating about 0.07 per unit of volatility. If you would invest  11,634  in Welltower on September 13, 2024 and sell it today you would earn a total of  596.00  from holding Welltower or generate 5.12% 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.  Welltower

NMI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 1 (%) 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.

Welltower

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Welltower 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 Welltower

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

The idea behind NMI Holdings and Welltower 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.