Correlation Between CITIC and NMI Holdings

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

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

Diversification Opportunities for CITIC and NMI Holdings

0.01

Correlation Coefficient

CITIC  NMI Holdings

Significant diversification

The 3 months correlation between CITIC and NMI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and CITIC 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 CITIC Limited 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 CITIC i.e., CITIC and NMI Holdings go up and down completely randomly.

Pair Corralation between CITIC and NMI Holdings

Assuming the 90 days horizon CITIC Limited is expected to generate 3.88 times more return on investment than NMI Holdings. However, CITIC is 3.88 times more volatile than NMI Holdings. It trades about 0.09 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.07 per unit of risk. If you would invest  14.00  in CITIC Limited on October 5, 2024 and sell it today you would earn a total of  92.00  from holding CITIC Limited or generate 657.14% return on investment over 90 days.

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

CITIC Limited  vs.  NMI Holdings

CITIC Limited

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with CITIC and NMI Holdings

The main advantage of trading using opposite CITIC and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC 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 CITIC Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.