Correlation Between NMI Holdings and AXIS Capital

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

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

Diversification Opportunities for NMI Holdings and AXIS Capital

-0.17

Correlation Coefficient

NMI Holdings  AXIS Capital

Good diversification

The 3 months correlation between NMI and AXIS is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital Holdings 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of NMI Holdings i.e., NMI Holdings and AXIS Capital go up and down completely randomly.

Pair Corralation between NMI Holdings and AXIS Capital

Given the investment horizon of 90 days NMI Holdings is expected to under-perform the AXIS Capital. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 1.01 times less risky than AXIS Capital. The stock trades about -0.03 of its potential returns per unit of risk. The AXIS Capital Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,002  in AXIS Capital Holdings on December 26, 2024 and sell it today you would earn a total of  861.00  from holding AXIS Capital Holdings or generate 9.56% return on investment over 90 days.

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

NMI Holdings  vs.  AXIS Capital Holdings

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.

AXIS Capital Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AXIS Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NMI Holdings and AXIS Capital

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

The idea behind NMI Holdings and AXIS Capital 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.