Correlation Between Orient Overseas and NMI Holdings

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

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

Diversification Opportunities for Orient Overseas and NMI Holdings

-0.58

Correlation Coefficient

Orient Overseas  NMI Holdings

Excellent diversification

The 3 months correlation between Orient and NMI is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Orient Overseas 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 Orient Overseas Limited are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Orient Overseas i.e., Orient Overseas and NMI Holdings go up and down completely randomly.

Pair Corralation between Orient Overseas and NMI Holdings

Assuming the 90 days trading horizon Orient Overseas Limited is expected to generate 1.47 times more return on investment than NMI Holdings. However, Orient Overseas is 1.47 times more volatile than NMI Holdings. It trades about 0.51 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.18 per unit of risk. If you would invest  1,200  in Orient Overseas Limited on October 6, 2024 and sell it today you would earn a total of  272.00  from holding Orient Overseas Limited or generate 22.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Orient Overseas Limited  vs.  NMI Holdings

Orient Overseas

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Orient Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

NMI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Orient Overseas and NMI Holdings

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

The idea behind Orient Overseas Limited and NMI Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.