Correlation Between NMI Holdings and Tyson Foods

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

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

Diversification Opportunities for NMI Holdings and Tyson Foods

0.13

Correlation Coefficient

NMI Holdings  Tyson Foods

Average diversification

The 3 months correlation between NMI and Tyson is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods 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 Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of NMI Holdings i.e., NMI Holdings and Tyson Foods go up and down completely randomly.

Pair Corralation between NMI Holdings and Tyson Foods

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Tyson Foods. In addition to that, NMI Holdings is 1.04 times more volatile than Tyson Foods. It trades about -0.09 of its total potential returns per unit of risk. Tyson Foods is currently generating about -0.05 per unit of volatility. If you would invest  6,136  in Tyson Foods on November 29, 2024 and sell it today you would lose (309.00) from holding Tyson Foods or give up 5.04% of portfolio value over 90 days.

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

NMI Holdings  vs.  Tyson Foods

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 uncertain 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.

Tyson Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tyson Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMI Holdings and Tyson Foods

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

The idea behind NMI Holdings and Tyson Foods 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.