Correlation Between NMI Holdings and Wilmar International

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

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

Diversification Opportunities for NMI Holdings and Wilmar International

-0.24

Correlation Coefficient

NMI Holdings  Wilmar International

Very good diversification

The 3 months correlation between NMI and Wilmar is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Wilmar International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of NMI Holdings i.e., NMI Holdings and Wilmar International go up and down completely randomly.

Pair Corralation between NMI Holdings and Wilmar International

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Wilmar International. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.41 times less risky than Wilmar International. The stock trades about -0.08 of its potential returns per unit of risk. The Wilmar International Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Wilmar International Limited on December 20, 2024 and sell it today you would earn a total of  8.00  from holding Wilmar International Limited or generate 3.72% return on investment over 90 days.

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

NMI Holdings  vs.  Wilmar International Limited

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 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.

Wilmar International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmar International Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Wilmar International 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 Wilmar International

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

The idea behind NMI Holdings and Wilmar International Limited 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.