Correlation Between Walmart and NMI Holdings

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

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

Diversification Opportunities for Walmart and NMI Holdings

0.62

Correlation Coefficient

Walmart  NMI Holdings

Poor diversification

The 3 months correlation between Walmart and NMI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Walmart 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 Walmart 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 Walmart i.e., Walmart and NMI Holdings go up and down completely randomly.

Pair Corralation between Walmart and NMI Holdings

Assuming the 90 days horizon Walmart is expected to under-perform the NMI Holdings. In addition to that, Walmart is 1.1 times more volatile than NMI Holdings. It trades about -0.08 of its total potential returns per unit of risk. NMI Holdings is currently generating about -0.05 per unit of volatility. If you would invest  3,500  in NMI Holdings on December 28, 2024 and sell it today you would lose (180.00) from holding NMI Holdings or give up 5.14% of portfolio value over 90 days.

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

Walmart  vs.  NMI Holdings

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart 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

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 Walmart and NMI Holdings

The main advantage of trading using opposite Walmart and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.