Correlation Between NMI Holdings and WPP PLC
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and WPP PLC 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 WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and WPP PLC ADR, you can compare the effects of market volatilities on NMI Holdings and WPP PLC 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 WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and WPP PLC.
Diversification Opportunities for NMI Holdings and WPP PLC
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NMI and WPP is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR 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 WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC ADR has no effect on the direction of NMI Holdings i.e., NMI Holdings and WPP PLC go up and down completely randomly.
Pair Corralation between NMI Holdings and WPP PLC
Assuming the 90 days horizon NMI Holdings is expected to generate 1.6 times more return on investment than WPP PLC. However, NMI Holdings is 1.6 times more volatile than WPP PLC ADR. It trades about 0.13 of its potential returns per unit of risk. WPP PLC ADR is currently generating about 0.04 per unit of risk. If you would invest 3,580 in NMI Holdings on August 31, 2024 and sell it today you would earn a total of 220.00 from holding NMI Holdings or generate 6.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. WPP PLC ADR
Performance |
| Timeline |
| NMI Holdings |
| WPP PLC ADR |
NMI Holdings and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and WPP PLC
The main advantage of trading using opposite NMI Holdings and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, WPP PLC 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 WPP PLC will offset losses from the drop in WPP PLC's long position.| NMI Holdings vs. Iridium Communications | NMI Holdings vs. BOS BETTER ONLINE | NMI Holdings vs. Verizon Communications | NMI Holdings vs. Singapore Telecommunications Limited |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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