Correlation Between SMA SOLAR and NMI Holdings
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
SMA SOLAR T vs. NMI Holdings
Performance |
Timeline |
SMA SOLAR T |
NMI Holdings |
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.SMA SOLAR vs. Nanjing Panda Electronics | SMA SOLAR vs. TAL Education Group | SMA SOLAR vs. UET United Electronic | SMA SOLAR vs. STMicroelectronics NV |
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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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