Correlation Between NMI Holdings and Wheaton Precious

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

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

Diversification Opportunities for NMI Holdings and Wheaton Precious

-0.59

Correlation Coefficient

NMI Holdings  Wheaton Precious

Excellent diversification

The 3 months correlation between NMI and Wheaton is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of NMI Holdings i.e., NMI Holdings and Wheaton Precious go up and down completely randomly.

Pair Corralation between NMI Holdings and Wheaton Precious

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Wheaton Precious. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.02 times less risky than Wheaton Precious. The stock trades about -0.04 of its potential returns per unit of risk. The Wheaton Precious Metals is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,478  in Wheaton Precious Metals on December 29, 2024 and sell it today you would earn a total of  1,596  from holding Wheaton Precious Metals or generate 29.13% return on investment over 90 days.

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

NMI Holdings  vs.  Wheaton Precious Metals

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 nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Wheaton Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wheaton Precious reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Wheaton Precious

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

The idea behind NMI Holdings and Wheaton Precious Metals 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.