Correlation Between NMI Holdings and CLEANTECH LITH

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

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

Diversification Opportunities for NMI Holdings and CLEANTECH LITH

0.27

Correlation Coefficient

NMI Holdings  CLEANTECH LITH

Modest diversification

The 3 months correlation between NMI and CLEANTECH is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and CLEANTECH LITH LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEANTECH LITH LS 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 CLEANTECH LITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEANTECH LITH LS has no effect on the direction of NMI Holdings i.e., NMI Holdings and CLEANTECH LITH go up and down completely randomly.

Pair Corralation between NMI Holdings and CLEANTECH LITH

Assuming the 90 days horizon NMI Holdings is expected to generate 1.51 times less return on investment than CLEANTECH LITH. But when comparing it to its historical volatility, NMI Holdings is 5.94 times less risky than CLEANTECH LITH. It trades about 0.07 of its potential returns per unit of risk. CLEANTECH LITH LS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  27.00  in CLEANTECH LITH LS on October 25, 2024 and sell it today you would lose (11.00) from holding CLEANTECH LITH LS or give up 40.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.51%
Values	Daily Returns

NMI Holdings  vs.  CLEANTECH LITH LS

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

CLEANTECH LITH LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLEANTECH LITH LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NMI Holdings and CLEANTECH LITH

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

The idea behind NMI Holdings and CLEANTECH LITH LS 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.