Correlation Between NMI Holdings and Trupanion

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

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

Diversification Opportunities for NMI Holdings and Trupanion

0.56

Correlation Coefficient

NMI Holdings  Trupanion

Very weak diversification

The 3 months correlation between NMI and Trupanion is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of NMI Holdings i.e., NMI Holdings and Trupanion go up and down completely randomly.

Pair Corralation between NMI Holdings and Trupanion

Given the investment horizon of 90 days NMI Holdings is expected to generate 19.68 times less return on investment than Trupanion. But when comparing it to its historical volatility, NMI Holdings is 2.4 times less risky than Trupanion. It trades about 0.03 of its potential returns per unit of risk. Trupanion is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,359  in Trupanion on December 29, 2024 and sell it today you would earn a total of  464.00  from holding Trupanion or generate 13.81% return on investment over 90 days.

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

NMI Holdings  vs.  Trupanion

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.

Trupanion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trupanion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NMI Holdings and Trupanion

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

The idea behind NMI Holdings and Trupanion 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.