Correlation Between NMI Holdings and Siemens Aktiengesellscha

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

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

Diversification Opportunities for NMI Holdings and Siemens Aktiengesellscha

-0.68

Correlation Coefficient

NMI Holdings  Siemens Aktiengesellscha

Excellent diversification

The 3 months correlation between NMI and Siemens is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Siemens Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Aktiengesellscha 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 Siemens Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Aktiengesellscha has no effect on the direction of NMI Holdings i.e., NMI Holdings and Siemens Aktiengesellscha go up and down completely randomly.

Pair Corralation between NMI Holdings and Siemens Aktiengesellscha

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Siemens Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.45 times less risky than Siemens Aktiengesellscha. The stock trades about -0.08 of its potential returns per unit of risk. The Siemens Aktiengesellschaft is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  18,466  in Siemens Aktiengesellschaft on December 21, 2024 and sell it today you would earn a total of  4,979  from holding Siemens Aktiengesellschaft or generate 26.96% return on investment over 90 days.

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

NMI Holdings  vs.  Siemens Aktiengesellschaft

NMI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Siemens Aktiengesellscha

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Siemens Aktiengesellscha unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Siemens Aktiengesellscha

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

The idea behind NMI Holdings and Siemens Aktiengesellschaft 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.