Correlation Between NI Holdings and HCI

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

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

Diversification Opportunities for NI Holdings and HCI

-0.26

Correlation Coefficient

NI Holdings  HCI

Very good diversification

The 3 months correlation between NODK and HCI is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group 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 HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of NI Holdings i.e., NI Holdings and HCI go up and down completely randomly.

Pair Corralation between NI Holdings and HCI

Given the investment horizon of 90 days NI Holdings is expected to under-perform the HCI. But the stock apears to be less risky and, when comparing its historical volatility, NI Holdings is 1.5 times less risky than HCI. The stock trades about -0.03 of its potential returns per unit of risk. The HCI Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,211  in HCI Group on October 25, 2024 and sell it today you would earn a total of  2,942  from holding HCI Group or generate 31.94% return on investment over 90 days.

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

NI Holdings  vs.  HCI Group

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 latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

HCI Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HCI Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, HCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NI Holdings and HCI

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

The idea behind NI Holdings and HCI Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.