Correlation Between AutoZone and NMI Holdings

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

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

Diversification Opportunities for AutoZone and NMI Holdings

-0.04

Correlation Coefficient

AutoZone  NMI Holdings

Good diversification

The 3 months correlation between AutoZone and NMI is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and AutoZone 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 AutoZone are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of AutoZone i.e., AutoZone and NMI Holdings go up and down completely randomly.

Pair Corralation between AutoZone and NMI Holdings

Assuming the 90 days horizon AutoZone is expected to generate 0.88 times more return on investment than NMI Holdings. However, AutoZone is 1.14 times less risky than NMI Holdings. It trades about 0.08 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.02 per unit of risk. If you would invest  283,600  in AutoZone on September 3, 2024 and sell it today you would earn a total of  19,700  from holding AutoZone or generate 6.95% return on investment over 90 days.

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

AutoZone  vs.  NMI Holdings

AutoZone

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NMI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AutoZone and NMI Holdings

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

The idea behind AutoZone and NMI Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.