Correlation Between NMI Holdings and AMERISAFE

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

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

Diversification Opportunities for NMI Holdings and AMERISAFE

0.08

Correlation Coefficient

NMI Holdings  AMERISAFE

Significant diversification

The 3 months correlation between NMI and AMERISAFE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and AMERISAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERISAFE and NMI Holdings 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 NMI Holdings are associated (or correlated) with AMERISAFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERISAFE has no effect on the direction of NMI Holdings i.e., NMI Holdings and AMERISAFE go up and down completely randomly.

Pair Corralation between NMI Holdings and AMERISAFE

Given the investment horizon of 90 days NMI Holdings is expected to under-perform the AMERISAFE. In addition to that, NMI Holdings is 1.3 times more volatile than AMERISAFE. It trades about -0.02 of its total potential returns per unit of risk. AMERISAFE is currently generating about 0.05 per unit of volatility. If you would invest  5,096  in AMERISAFE on December 29, 2024 and sell it today you would earn a total of  171.00  from holding AMERISAFE or generate 3.36% return on investment over 90 days.

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

NMI Holdings  vs.  AMERISAFE

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 fairly strong forward indicators, NMI Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

AMERISAFE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERISAFE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AMERISAFE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMI Holdings and AMERISAFE

The main advantage of trading using opposite NMI Holdings and AMERISAFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, AMERISAFE 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 AMERISAFE will offset losses from the drop in AMERISAFE's long position.

The idea behind NMI Holdings and AMERISAFE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.