Correlation Between TRAVEL + and NMI Holdings

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and NMI Holdings, you can compare the effects of market volatilities on TRAVEL + 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 TRAVEL + with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and NMI Holdings.

Diversification Opportunities for TRAVEL + and NMI Holdings

-0.1

Correlation Coefficient

TRAVEL +  NMI Holdings

Good diversification

The 3 months correlation between TRAVEL and NMI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and TRAVEL + 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 TRAVEL LEISURE DL 01 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 TRAVEL + i.e., TRAVEL + and NMI Holdings go up and down completely randomly.

Pair Corralation between TRAVEL + and NMI Holdings

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.16 times more return on investment than NMI Holdings. However, TRAVEL + is 1.16 times more volatile than NMI Holdings. It trades about 0.08 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.07 per unit of risk. If you would invest  3,473  in TRAVEL LEISURE DL 01 on October 5, 2024 and sell it today you would earn a total of  1,347  from holding TRAVEL LEISURE DL 01 or generate 38.78% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  NMI Holdings

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

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 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 TRAVEL + and NMI Holdings

The main advantage of trading using opposite TRAVEL + and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + 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 TRAVEL LEISURE DL 01 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.