Correlation Between NMI Holdings and WSP Global
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and WSP Global 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 WSP Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and WSP Global, you can compare the effects of market volatilities on NMI Holdings and WSP Global 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 WSP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and WSP Global.
Diversification Opportunities for NMI Holdings and WSP Global
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between NMI and WSP is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global 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 WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of NMI Holdings i.e., NMI Holdings and WSP Global go up and down completely randomly.
Pair Corralation between NMI Holdings and WSP Global
Assuming the 90 days horizon NMI Holdings is expected to generate 1.04 times more return on investment than WSP Global. However, NMI Holdings is 1.04 times more volatile than WSP Global. It trades about 0.09 of its potential returns per unit of risk. WSP Global is currently generating about 0.07 per unit of risk. If you would invest 2,420 in NMI Holdings on September 1, 2024 and sell it today you would earn a total of 1,360 from holding NMI Holdings or generate 56.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
NMI Holdings vs. WSP Global
Performance |
| Timeline |
| NMI Holdings |
| WSP Global |
NMI Holdings and WSP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and WSP Global
The main advantage of trading using opposite NMI Holdings and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, WSP Global 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 WSP Global will offset losses from the drop in WSP Global's long position.| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
| WSP Global vs. COVIVIO HOTELS INH | WSP Global vs. Insteel Industries | WSP Global vs. Summit Hotel Properties | WSP Global vs. Dalata Hotel Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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