Correlation Between NMI Holdings and Southern Copper

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Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Southern Copper 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 Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Southern Copper, you can compare the effects of market volatilities on NMI Holdings and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Southern Copper.

Diversification Opportunities for NMI Holdings and Southern Copper

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between NMI and Southern is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of NMI Holdings i.e., NMI Holdings and Southern Copper go up and down completely randomly.

Pair Corralation between NMI Holdings and Southern Copper

Assuming the 90 days horizon NMI Holdings is expected to generate 0.68 times more return on investment than Southern Copper. However, NMI Holdings is 1.48 times less risky than Southern Copper. It trades about 0.06 of its potential returns per unit of risk. Southern Copper is currently generating about 0.02 per unit of risk. If you would invest  3,540  in NMI Holdings on September 19, 2024 and sell it today you would earn a total of  60.00  from holding NMI Holdings or generate 1.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NMI Holdings  vs.  Southern Copper

 Performance 
       Timeline  
NMI Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Southern Copper 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Southern Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NMI Holdings and Southern Copper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMI Holdings and Southern Copper

The main advantage of trading using opposite NMI Holdings and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.
The idea behind NMI Holdings and Southern Copper 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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