Correlation Between EBay and NMI Holdings

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

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

Diversification Opportunities for EBay and NMI Holdings

0.39

Correlation Coefficient

EBay  NMI Holdings

Weak diversification

The 3 months correlation between EBay and NMI is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and EBay 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 eBay Inc 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 EBay i.e., EBay and NMI Holdings go up and down completely randomly.

Pair Corralation between EBay and NMI Holdings

Assuming the 90 days horizon eBay Inc is expected to generate 1.06 times more return on investment than NMI Holdings. However, EBay is 1.06 times more volatile than NMI Holdings. It trades about 0.13 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.02 per unit of risk. If you would invest  5,322  in eBay Inc on September 3, 2024 and sell it today you would earn a total of  792.00  from holding eBay Inc or generate 14.88% return on investment over 90 days.

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

eBay Inc  vs.  NMI Holdings

eBay Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, EBay reported solid returns over the last few months and may actually be approaching a breakup point.

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 EBay and NMI Holdings

The main advantage of trading using opposite EBay and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 eBay Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.