Correlation Between Takeda Pharmaceutical and NMI Holdings

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

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

Diversification Opportunities for Takeda Pharmaceutical and NMI Holdings

-0.63

Correlation Coefficient

Takeda Pharmaceutical  NMI Holdings

Excellent diversification

The 3 months correlation between Takeda and NMI is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Takeda Pharmaceutical 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 Takeda Pharmaceutical 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 Takeda Pharmaceutical i.e., Takeda Pharmaceutical and NMI Holdings go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and NMI Holdings

Assuming the 90 days horizon Takeda Pharmaceutical is expected to generate 0.81 times more return on investment than NMI Holdings. However, Takeda Pharmaceutical is 1.23 times less risky than NMI Holdings. It trades about 0.12 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.09 per unit of risk. If you would invest  2,501  in Takeda Pharmaceutical on December 20, 2024 and sell it today you would earn a total of  232.00  from holding Takeda Pharmaceutical or generate 9.28% return on investment over 90 days.

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

Takeda Pharmaceutical  vs.  NMI Holdings

Takeda Pharmaceutical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Takeda Pharmaceutical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Takeda Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 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.

Pair Trading with Takeda Pharmaceutical and NMI Holdings

The main advantage of trading using opposite Takeda Pharmaceutical and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Takeda Pharmaceutical 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 Takeda Pharmaceutical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.