Correlation Between NMI Holdings and Restaurant Brands
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Restaurant Brands 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 NMI Holdings and Restaurant Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Restaurant Brands International, you can compare the effects of market volatilities on NMI Holdings and Restaurant Brands 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 NMI Holdings with a short position of Restaurant Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Restaurant Brands.
Diversification Opportunities for NMI Holdings and Restaurant Brands
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NMI and Restaurant is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands and NMI Holdings 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 NMI Holdings are associated (or correlated) with Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of NMI Holdings i.e., NMI Holdings and Restaurant Brands go up and down completely randomly.
Pair Corralation between NMI Holdings and Restaurant Brands
Assuming the 90 days horizon NMI Holdings is expected to generate 1.25 times more return on investment than Restaurant Brands. However, NMI Holdings is 1.25 times more volatile than Restaurant Brands International. It trades about 0.22 of its potential returns per unit of risk. Restaurant Brands International is currently generating about 0.08 per unit of risk. If you would invest 3,460 in NMI Holdings on September 12, 2024 and sell it today you would earn a total of 240.00 from holding NMI Holdings or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Restaurant Brands Internationa
Performance |
| Timeline |
| NMI Holdings |
| Restaurant Brands |
NMI Holdings and Restaurant Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Restaurant Brands
The main advantage of trading using opposite NMI Holdings and Restaurant Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Restaurant Brands 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 Restaurant Brands will offset losses from the drop in Restaurant Brands' long position.| NMI Holdings vs. Nufarm Limited | NMI Holdings vs. AVITA Medical | NMI Holdings vs. Sterling Construction | NMI Holdings vs. Avanos Medical |
| Restaurant Brands vs. Starbucks | Restaurant Brands vs. Superior Plus Corp | Restaurant Brands vs. SIVERS SEMICONDUCTORS AB | Restaurant Brands vs. NorAm Drilling AS |
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.
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