Correlation Between Fidelity National and NMI Holdings

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

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

Diversification Opportunities for Fidelity National and NMI Holdings

0.66

Correlation Coefficient

Fidelity National  NMI Holdings

Poor diversification

The 3 months correlation between Fidelity and NMI is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Financial and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Fidelity National 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 Fidelity National Financial 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 Fidelity National i.e., Fidelity National and NMI Holdings go up and down completely randomly.

Pair Corralation between Fidelity National and NMI Holdings

Considering the 90-day investment horizon Fidelity National is expected to generate 1.16 times less return on investment than NMI Holdings. But when comparing it to its historical volatility, Fidelity National Financial is 1.02 times less risky than NMI Holdings. It trades about 0.05 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,056  in NMI Holdings on October 2, 2024 and sell it today you would earn a total of  623.00  from holding NMI Holdings or generate 20.39% return on investment over 90 days.

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

Fidelity National Financial  vs.  NMI Holdings

Fidelity National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

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 forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Fidelity National and NMI Holdings

The main advantage of trading using opposite Fidelity National and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity National 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 Fidelity National Financial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.