Correlation Between NMI Holdings and Take Two

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

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

Diversification Opportunities for NMI Holdings and Take Two

-0.2

Correlation Coefficient

NMI Holdings  Take Two

Good diversification

The 3 months correlation between NMI and Take is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive 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 Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of NMI Holdings i.e., NMI Holdings and Take Two go up and down completely randomly.

Pair Corralation between NMI Holdings and Take Two

Assuming the 90 days horizon NMI Holdings is expected to generate 0.92 times more return on investment than Take Two. However, NMI Holdings is 1.08 times less risky than Take Two. It trades about 0.07 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.06 per unit of risk. If you would invest  2,720  in NMI Holdings on October 5, 2024 and sell it today you would earn a total of  780.00  from holding NMI Holdings or generate 28.68% return on investment over 90 days.

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

NMI Holdings  vs.  Take Two Interactive Software

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 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.

Take Two Interactive

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Take Two Interactive Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Take Two reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Take Two

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

The idea behind NMI Holdings and Take Two Interactive Software 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.