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 LTD ADR5 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

0.13

Correlation Coefficient

CITIC  NMI Holdings

Average diversification

The 3 months correlation between CITIC and NMI is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CITIC LTD ADR5 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 LTD ADR5 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 trading horizon CITIC LTD ADR5 is expected to under-perform the NMI Holdings. But the stock apears to be less risky and, when comparing its historical volatility, CITIC LTD ADR5 is 1.06 times less risky than NMI Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The NMI Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,620  in NMI Holdings on October 22, 2024 and sell it today you would earn a total of  40.00  from holding NMI Holdings or generate 1.1% return on investment over 90 days.

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

CITIC LTD ADR5  vs.  NMI Holdings

CITIC LTD ADR5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC LTD ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CITIC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 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 LTD ADR5 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.