Correlation Between NMI Holdings and PEPKOR

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

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

Diversification Opportunities for NMI Holdings and PEPKOR

0.04

Correlation Coefficient

NMI Holdings  PEPKOR

Significant diversification

The 3 months correlation between NMI and PEPKOR is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and PEPKOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPKOR LTD 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 PEPKOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPKOR LTD has no effect on the direction of NMI Holdings i.e., NMI Holdings and PEPKOR go up and down completely randomly.

Pair Corralation between NMI Holdings and PEPKOR

Assuming the 90 days horizon NMI Holdings is expected to under-perform the PEPKOR. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 5.68 times less risky than PEPKOR. The stock trades about -0.02 of its potential returns per unit of risk. The PEPKOR LTD is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  77.00  in PEPKOR LTD on October 26, 2024 and sell it today you would earn a total of  52.00  from holding PEPKOR LTD or generate 67.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

NMI Holdings  vs.  PEPKOR LTD

NMI Holdings

Risk-Adjusted Performance

1 of 100

Weak

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

PEPKOR LTD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PEPKOR LTD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PEPKOR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and PEPKOR

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

The idea behind NMI Holdings and PEPKOR LTD 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.