Correlation Between NMI Holdings and Fidelity National

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

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

Diversification Opportunities for NMI Holdings and Fidelity National

-0.3

Correlation Coefficient

NMI Holdings  Fidelity National

Very good diversification

The 3 months correlation between NMI and Fidelity is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Fidelity National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National 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 Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of NMI Holdings i.e., NMI Holdings and Fidelity National go up and down completely randomly.

Pair Corralation between NMI Holdings and Fidelity National

Given the investment horizon of 90 days NMI Holdings is expected to generate 175.93 times less return on investment than Fidelity National. In addition to that, NMI Holdings is 1.01 times more volatile than Fidelity National Financial. It trades about 0.0 of its total potential returns per unit of risk. Fidelity National Financial is currently generating about 0.18 per unit of volatility. If you would invest  5,589  in Fidelity National Financial on December 27, 2024 and sell it today you would earn a total of  867.00  from holding Fidelity National Financial or generate 15.51% 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.  Fidelity National Financial

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.

Fidelity National

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fidelity National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Fidelity National

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

The idea behind NMI Holdings and Fidelity National Financial 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.

Check out your portfolio center.

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.