Correlation Between NMI Holdings and Hartford Financial

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

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

Diversification Opportunities for NMI Holdings and Hartford Financial

0.28

Correlation Coefficient

NMI Holdings  Hartford Financial

Modest diversification

The 3 months correlation between NMI and Hartford is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and The Hartford Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hartford Financial 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 Hartford Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hartford Financial has no effect on the direction of NMI Holdings i.e., NMI Holdings and Hartford Financial go up and down completely randomly.

Pair Corralation between NMI Holdings and Hartford Financial

Assuming the 90 days horizon NMI Holdings is expected to generate 4.48 times less return on investment than Hartford Financial. In addition to that, NMI Holdings is 1.18 times more volatile than The Hartford Financial. It trades about 0.02 of its total potential returns per unit of risk. The Hartford Financial is currently generating about 0.12 per unit of volatility. If you would invest  10,500  in The Hartford Financial on September 3, 2024 and sell it today you would earn a total of  1,200  from holding The Hartford Financial or generate 11.43% 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.  The Hartford Financial

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.

The Hartford Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hartford Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NMI Holdings and Hartford Financial

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

The idea behind NMI Holdings and The Hartford Financial 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.