Correlation Between NMI Holdings and Takeda Pharmaceutical

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

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

Diversification Opportunities for NMI Holdings and Takeda Pharmaceutical

-0.63

Correlation Coefficient

NMI Holdings  Takeda Pharmaceutical

Excellent diversification

The 3 months correlation between NMI and Takeda is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of NMI Holdings i.e., NMI Holdings and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between NMI Holdings and Takeda Pharmaceutical

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Takeda Pharmaceutical. In addition to that, NMI Holdings is 1.23 times more volatile than Takeda Pharmaceutical. It trades about -0.09 of its total potential returns per unit of risk. Takeda Pharmaceutical is currently generating about 0.12 per unit of volatility. If you would invest  2,501  in Takeda Pharmaceutical on December 20, 2024 and sell it today you would earn a total of  232.00  from holding Takeda Pharmaceutical or generate 9.28% 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.  Takeda Pharmaceutical

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.

Takeda Pharmaceutical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Takeda Pharmaceutical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Takeda Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NMI Holdings and Takeda Pharmaceutical

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

The idea behind NMI Holdings and Takeda Pharmaceutical 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.