Correlation Between PEPKOR and NMI Holdings

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

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

Diversification Opportunities for PEPKOR and NMI Holdings

-0.06

Correlation Coefficient

PEPKOR  NMI Holdings

Good diversification

The 3 months correlation between PEPKOR and NMI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding PEPKOR LTD and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and PEPKOR 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 PEPKOR LTD 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 PEPKOR i.e., PEPKOR and NMI Holdings go up and down completely randomly.

Pair Corralation between PEPKOR and NMI Holdings

Assuming the 90 days trading horizon PEPKOR LTD is expected to generate 4.94 times more return on investment than NMI Holdings. However, PEPKOR is 4.94 times more volatile than NMI Holdings. It trades about 0.09 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.09 per unit of risk. If you would invest  92.00  in PEPKOR LTD on December 19, 2024 and sell it today you would earn a total of  30.00  from holding PEPKOR LTD or generate 32.61% return on investment over 90 days.

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

PEPKOR LTD  vs.  NMI Holdings

PEPKOR LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PEPKOR LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PEPKOR reported solid returns over the last few months and may actually be approaching a breakup point.

NMI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PEPKOR and NMI Holdings

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

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.