Correlation Between NMI Holdings and Société Générale

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

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

Diversification Opportunities for NMI Holdings and Société Générale

-0.62

Correlation Coefficient

NMI Holdings  Société Générale

Excellent diversification

The 3 months correlation between NMI and Société is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Socit Gnrale Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit Gnrale Socit 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 Société Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit Gnrale Socit has no effect on the direction of NMI Holdings i.e., NMI Holdings and Société Générale go up and down completely randomly.

Pair Corralation between NMI Holdings and Société Générale

Assuming the 90 days horizon NMI Holdings is expected to generate 1.22 times more return on investment than Société Générale. However, NMI Holdings is 1.22 times more volatile than Socit Gnrale Socit. It trades about 0.08 of its potential returns per unit of risk. Socit Gnrale Socit is currently generating about 0.03 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 Against
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

NMI Holdings  vs.  Socit Gnrale Socit

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.

Socit Gnrale Socit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Socit Gnrale Socit are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Société Générale

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

The idea behind NMI Holdings and Socit Gnrale Socit 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.