Correlation Between NI Holdings and Group 1

Can any of the company-specific risk be diversified away by investing in both NI Holdings and Group 1 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 NI Holdings and Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NI Holdings and Group 1 Automotive, you can compare the effects of market volatilities on NI Holdings and Group 1 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 NI Holdings with a short position of Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of NI Holdings and Group 1.

Diversification Opportunities for NI Holdings and Group 1

0.51

Correlation Coefficient

NI Holdings  Group 1

Very weak diversification

The 3 months correlation between NODK and Group is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive and NI 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 NI Holdings are associated (or correlated) with Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of NI Holdings i.e., NI Holdings and Group 1 go up and down completely randomly.

Pair Corralation between NI Holdings and Group 1

Given the investment horizon of 90 days NI Holdings is expected to under-perform the Group 1. In addition to that, NI Holdings is 1.35 times more volatile than Group 1 Automotive. It trades about -0.41 of its total potential returns per unit of risk. Group 1 Automotive is currently generating about -0.04 per unit of volatility. If you would invest  42,456  in Group 1 Automotive on October 11, 2024 and sell it today you would lose (386.00) from holding Group 1 Automotive or give up 0.91% of portfolio value over 90 days.

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

NI Holdings  vs.  Group 1 Automotive

NI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Group 1 Automotive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Group 1 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NI Holdings and Group 1

The main advantage of trading using opposite NI Holdings and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.

The idea behind NI Holdings and Group 1 Automotive 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.