Correlation Between NMI Holdings and Thyssenkrupp

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

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

Diversification Opportunities for NMI Holdings and Thyssenkrupp

-0.61

Correlation Coefficient

NMI Holdings  Thyssenkrupp

Excellent diversification

The 3 months correlation between NMI and Thyssenkrupp is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of NMI Holdings i.e., NMI Holdings and Thyssenkrupp go up and down completely randomly.

Pair Corralation between NMI Holdings and Thyssenkrupp

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 3.83 times less risky than Thyssenkrupp. The stock trades about -0.09 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  378.00  in thyssenkrupp AG on December 24, 2024 and sell it today you would earn a total of  542.00  from holding thyssenkrupp AG or generate 143.39% 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.  thyssenkrupp AG

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.

thyssenkrupp AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Thyssenkrupp

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

The idea behind NMI Holdings and thyssenkrupp AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.