Correlation Between NI Holdings and White Mountains

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

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

Diversification Opportunities for NI Holdings and White Mountains

0.59

Correlation Coefficient

NI Holdings  White Mountains

Very weak diversification

The 3 months correlation between NODK and White is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains Insurance 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 White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of NI Holdings i.e., NI Holdings and White Mountains go up and down completely randomly.

Pair Corralation between NI Holdings and White Mountains

Given the investment horizon of 90 days NI Holdings is expected to under-perform the White Mountains. In addition to that, NI Holdings is 1.2 times more volatile than White Mountains Insurance. It trades about -0.11 of its total potential returns per unit of risk. White Mountains Insurance is currently generating about -0.01 per unit of volatility. If you would invest  191,771  in White Mountains Insurance on December 27, 2024 and sell it today you would lose (1,772) from holding White Mountains Insurance or give up 0.92% 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.  White Mountains Insurance

NI Holdings

Risk-Adjusted Performance

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.

White Mountains Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days White Mountains Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, White Mountains is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NI Holdings and White Mountains

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

The idea behind NI Holdings and White Mountains Insurance 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.