Correlation Between Lendlease and NMI Holdings

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

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

Diversification Opportunities for Lendlease and NMI Holdings

0.54

Correlation Coefficient

Lendlease  NMI Holdings

Very weak diversification

The 3 months correlation between Lendlease and NMI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Lendlease 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 Lendlease Group 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 Lendlease i.e., Lendlease and NMI Holdings go up and down completely randomly.

Pair Corralation between Lendlease and NMI Holdings

Assuming the 90 days trading horizon Lendlease Group is expected to generate 0.95 times more return on investment than NMI Holdings. However, Lendlease Group is 1.05 times less risky than NMI Holdings. It trades about -0.01 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.08 per unit of risk. If you would invest  365.00  in Lendlease Group on December 21, 2024 and sell it today you would lose (7.00) from holding Lendlease Group or give up 1.92% of portfolio value over 90 days.

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

Lendlease Group  vs.  NMI Holdings

Lendlease Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lendlease is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NMI Holdings

Risk-Adjusted Performance

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 unfluctuating 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 Lendlease and NMI Holdings

The main advantage of trading using opposite Lendlease and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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 Lendlease Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..