Correlation Between SMA SOLAR and NMI Holdings

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Can any of the company-specific risk be diversified away by investing in both SMA SOLAR 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 SMA SOLAR and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA SOLAR T and NMI Holdings, you can compare the effects of market volatilities on SMA SOLAR 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 SMA SOLAR with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA SOLAR and NMI Holdings.

Diversification Opportunities for SMA SOLAR and NMI Holdings

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between SMA and NMI is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding SMA SOLAR T and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and SMA SOLAR 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 SMA SOLAR T 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 SMA SOLAR i.e., SMA SOLAR and NMI Holdings go up and down completely randomly.

Pair Corralation between SMA SOLAR and NMI Holdings

Assuming the 90 days horizon SMA SOLAR T is expected to under-perform the NMI Holdings. In addition to that, SMA SOLAR is 4.01 times more volatile than NMI Holdings. It trades about -0.02 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.08 per unit of volatility. If you would invest  2,040  in NMI Holdings on October 11, 2024 and sell it today you would earn a total of  1,520  from holding NMI Holdings or generate 74.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

SMA SOLAR T  vs.  NMI Holdings

 Performance 
       Timeline  
SMA SOLAR T 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in SMA SOLAR T are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SMA SOLAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.
NMI Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

SMA SOLAR and NMI Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SMA SOLAR and NMI Holdings

The main advantage of trading using opposite SMA SOLAR and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA SOLAR 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 SMA SOLAR T 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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