Correlation Between NI Holdings and Red River

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

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

Diversification Opportunities for NI Holdings and Red River

0.76

Correlation Coefficient

NI Holdings  Red River

Poor diversification

The 3 months correlation between NODK and Red is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River Bancshares 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 Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of NI Holdings i.e., NI Holdings and Red River go up and down completely randomly.

Pair Corralation between NI Holdings and Red River

Given the investment horizon of 90 days NI Holdings is expected to generate 1.25 times more return on investment than Red River. However, NI Holdings is 1.25 times more volatile than Red River Bancshares. It trades about 0.18 of its potential returns per unit of risk. Red River Bancshares is currently generating about 0.05 per unit of risk. If you would invest  1,574  in NI Holdings on September 16, 2024 and sell it today you would earn a total of  94.00  from holding NI Holdings or generate 5.97% return on investment over 90 days.

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

NI Holdings  vs.  Red River Bancshares

NI Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Red River Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red River Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Red River may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NI Holdings and Red River

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

The idea behind NI Holdings and Red River Bancshares 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.