Correlation Between NMI Holdings and Seiko Epson

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

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

Diversification Opportunities for NMI Holdings and Seiko Epson

0.22

Correlation Coefficient

NMI Holdings  Seiko Epson

Modest diversification

The 3 months correlation between NMI and Seiko is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of NMI Holdings i.e., NMI Holdings and Seiko Epson go up and down completely randomly.

Pair Corralation between NMI Holdings and Seiko Epson

Assuming the 90 days horizon NMI Holdings is expected to generate 1.55 times more return on investment than Seiko Epson. However, NMI Holdings is 1.55 times more volatile than Seiko Epson. It trades about 0.08 of its potential returns per unit of risk. Seiko Epson is currently generating about 0.09 per unit of risk. If you would invest  3,380  in NMI Holdings on October 6, 2024 and sell it today you would earn a total of  180.00  from holding NMI Holdings or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NMI Holdings  vs.  Seiko Epson

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.

Seiko Epson

Risk-Adjusted Performance

3 of 100

Insignificant

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

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

The idea behind NMI Holdings and Seiko Epson 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.