Correlation Between NI Holdings and Trupanion

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

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

Diversification Opportunities for NI Holdings and Trupanion

0.58

Correlation Coefficient

NI Holdings  Trupanion

Very weak diversification

The 3 months correlation between NODK and Trupanion is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 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 NI Holdings i.e., NI Holdings and Trupanion go up and down completely randomly.

Pair Corralation between NI Holdings and Trupanion

Given the investment horizon of 90 days NI Holdings is expected to generate 0.5 times more return on investment than Trupanion. However, NI Holdings is 1.99 times less risky than Trupanion. It trades about -0.03 of its potential returns per unit of risk. Trupanion is currently generating about -0.02 per unit of risk. If you would invest  1,565  in NI Holdings on September 24, 2024 and sell it today you would lose (34.00) from holding NI Holdings or give up 2.17% 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.  Trupanion

NI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Trupanion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NI Holdings and Trupanion

The main advantage of trading using opposite NI Holdings and Trupanion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI 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 NI 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.