Correlation Between NMI Holdings and PGE

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

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

Diversification Opportunities for NMI Holdings and PGE

-0.13

Correlation Coefficient

NMI Holdings  PGE

Good diversification

The 3 months correlation between NMI and PGE is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and PGE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corporation 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 PGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corporation has no effect on the direction of NMI Holdings i.e., NMI Holdings and PGE go up and down completely randomly.

Pair Corralation between NMI Holdings and PGE

Assuming the 90 days horizon NMI Holdings is expected to under-perform the PGE. In addition to that, NMI Holdings is 1.0 times more volatile than PGE Corporation. It trades about -0.13 of its total potential returns per unit of risk. PGE Corporation is currently generating about -0.03 per unit of volatility. If you would invest  1,901  in PGE Corporation on October 10, 2024 and sell it today you would lose (19.00) from holding PGE Corporation or give up 1.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

NMI Holdings  vs.  PGE Corp.

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.

PGE Corporation

Risk-Adjusted Performance

6 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PGE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NMI Holdings and PGE

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

The idea behind NMI Holdings and PGE Corporation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.