Correlation Between NMI Holdings and NOV

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

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

Diversification Opportunities for NMI Holdings and NOV

0.3

Correlation Coefficient

NMI Holdings  NOV

Weak diversification

The 3 months correlation between NMI and NOV is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of NMI Holdings i.e., NMI Holdings and NOV go up and down completely randomly.

Pair Corralation between NMI Holdings and NOV

Assuming the 90 days horizon NMI Holdings is expected to under-perform the NOV. In addition to that, NMI Holdings is 1.1 times more volatile than NOV Inc. It trades about -0.14 of its total potential returns per unit of risk. NOV Inc is currently generating about 0.03 per unit of volatility. If you would invest  1,409  in NOV Inc on October 9, 2024 and sell it today you would earn a total of  8.00  from holding NOV Inc or generate 0.57% 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.  NOV Inc

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 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.

NOV Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind NMI Holdings and NOV Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.