Correlation Between NMI Holdings and Sempra

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

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

Diversification Opportunities for NMI Holdings and Sempra

-0.07

Correlation Coefficient

NMI Holdings  Sempra

Good diversification

The 3 months correlation between NMI and Sempra is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Sempra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra 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 Sempra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra has no effect on the direction of NMI Holdings i.e., NMI Holdings and Sempra go up and down completely randomly.

Pair Corralation between NMI Holdings and Sempra

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Sempra. In addition to that, NMI Holdings is 1.23 times more volatile than Sempra. It trades about -0.18 of its total potential returns per unit of risk. Sempra is currently generating about -0.03 per unit of volatility. If you would invest  8,582  in Sempra on October 6, 2024 and sell it today you would lose (66.00) from holding Sempra or give up 0.77% 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.  Sempra

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sempra

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with NMI Holdings and Sempra

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

The idea behind NMI Holdings and Sempra 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 CEOs Directory module to screen CEOs from public companies around the world.