Correlation Between Treasury Wine and NMI Holdings

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

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

Diversification Opportunities for Treasury Wine and NMI Holdings

0.57

Correlation Coefficient

Treasury Wine  NMI Holdings

Very weak diversification

The 3 months correlation between Treasury and NMI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and NMI Holdings go up and down completely randomly.

Pair Corralation between Treasury Wine and NMI Holdings

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the NMI Holdings. In addition to that, Treasury Wine is 1.03 times more volatile than NMI Holdings. It trades about -0.01 of its total potential returns per unit of risk. NMI Holdings is currently generating about -0.01 per unit of volatility. If you would invest  3,720  in NMI Holdings on October 24, 2024 and sell it today you would lose (80.00) from holding NMI Holdings or give up 2.15% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  NMI Holdings

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

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

Pair Trading with Treasury Wine and NMI Holdings

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