Correlation Between NMI Holdings and Vanguard ESG

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

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

Diversification Opportunities for NMI Holdings and Vanguard ESG

0.43

Correlation Coefficient

NMI Holdings  Vanguard ESG

Very weak diversification

The 3 months correlation between NMI and Vanguard is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Vanguard ESG Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Developed 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 Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Developed has no effect on the direction of NMI Holdings i.e., NMI Holdings and Vanguard ESG go up and down completely randomly.

Pair Corralation between NMI Holdings and Vanguard ESG

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Vanguard ESG. In addition to that, NMI Holdings is 1.83 times more volatile than Vanguard ESG Developed. It trades about -0.04 of its total potential returns per unit of risk. Vanguard ESG Developed is currently generating about -0.05 per unit of volatility. If you would invest  640.00  in Vanguard ESG Developed on December 31, 2024 and sell it today you would lose (17.00) from holding Vanguard ESG Developed or give up 2.66% of portfolio value over 90 days.

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

NMI Holdings  vs.  Vanguard ESG Developed

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 nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard ESG Developed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard ESG Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NMI Holdings and Vanguard ESG

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

The idea behind NMI Holdings and Vanguard ESG Developed 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.