Correlation Between NMI Holdings and SP Global

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

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

Diversification Opportunities for NMI Holdings and SP Global

0.31

Correlation Coefficient

NMI Holdings  SP Global

Weak diversification

The 3 months correlation between NMI and MHL is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of NMI Holdings i.e., NMI Holdings and SP Global go up and down completely randomly.

Pair Corralation between NMI Holdings and SP Global

Assuming the 90 days horizon NMI Holdings is expected to under-perform the SP Global. In addition to that, NMI Holdings is 1.11 times more volatile than SP Global. It trades about -0.13 of its total potential returns per unit of risk. SP Global is currently generating about -0.03 per unit of volatility. If you would invest  46,916  in SP Global on December 18, 2024 and sell it today you would lose (1,531) from holding SP Global or give up 3.26% of portfolio value over 90 days.

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

NMI Holdings  vs.  SP Global

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SP Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SP Global 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 SP Global

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

The idea behind NMI Holdings and SP Global 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.