Correlation Between NMI Holdings and S A P

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

Diversification Opportunities for NMI Holdings and S A P

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between NMI and SAP is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of NMI Holdings i.e., NMI Holdings and S A P go up and down completely randomly.

Pair Corralation between NMI Holdings and S A P

Assuming the 90 days horizon NMI Holdings is expected to generate 1.33 times less return on investment than S A P. In addition to that, NMI Holdings is 1.12 times more volatile than SAP SE. It trades about 0.11 of its total potential returns per unit of risk. SAP SE is currently generating about 0.16 per unit of volatility. If you would invest  16,826  in SAP SE on September 1, 2024 and sell it today you would earn a total of  5,664  from holding SAP SE or generate 33.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NMI Holdings  vs.  SAP SE

 Performance 
       Timeline  
NMI Holdings 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.
SAP SE 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in December 2024.

NMI Holdings and S A P Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMI Holdings and S A P

The main advantage of trading using opposite NMI Holdings and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.
The idea behind NMI Holdings and SAP SE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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