Correlation Between NMI Holdings and Aeon Co

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

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

Diversification Opportunities for NMI Holdings and Aeon Co

0.03

Correlation Coefficient

NMI Holdings  Aeon Co

Significant diversification

The 3 months correlation between NMI and Aeon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Co 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 Aeon Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Co has no effect on the direction of NMI Holdings i.e., NMI Holdings and Aeon Co go up and down completely randomly.

Pair Corralation between NMI Holdings and Aeon Co

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Aeon Co. In addition to that, NMI Holdings is 1.27 times more volatile than Aeon Co. It trades about -0.29 of its total potential returns per unit of risk. Aeon Co is currently generating about -0.15 per unit of volatility. If you would invest  2,320  in Aeon Co on October 5, 2024 and sell it today you would lose (80.00) from holding Aeon Co or give up 3.45% of portfolio value over 90 days.

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

NMI Holdings  vs.  Aeon Co

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aeon Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NMI Holdings and Aeon Co

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

The idea behind NMI Holdings and Aeon Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.