Correlation Between NMI Holdings and Japan Real

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

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

Diversification Opportunities for NMI Holdings and Japan Real

0.04

Correlation Coefficient

NMI Holdings  Japan Real

Significant diversification

The 3 months correlation between NMI and Japan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Japan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Real Estate 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 Japan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Real Estate has no effect on the direction of NMI Holdings i.e., NMI Holdings and Japan Real go up and down completely randomly.

Pair Corralation between NMI Holdings and Japan Real

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Japan Real. In addition to that, NMI Holdings is 1.15 times more volatile than Japan Real Estate. It trades about -0.04 of its total potential returns per unit of risk. Japan Real Estate is currently generating about 0.06 per unit of volatility. If you would invest  64,000  in Japan Real Estate on December 28, 2024 and sell it today you would earn a total of  3,000  from holding Japan Real Estate or generate 4.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NMI Holdings  vs.  Japan Real Estate

NMI Holdings

Risk-Adjusted Performance

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.

Japan Real Estate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Real Estate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Real is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMI Holdings and Japan Real

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

The idea behind NMI Holdings and Japan Real Estate 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..