Correlation Between NMI Holdings and Omeros

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Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Omeros 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 Omeros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Omeros, you can compare the effects of market volatilities on NMI Holdings and Omeros 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 Omeros. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Omeros.

Diversification Opportunities for NMI Holdings and Omeros

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between NMI and Omeros is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Omeros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omeros 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 Omeros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omeros has no effect on the direction of NMI Holdings i.e., NMI Holdings and Omeros go up and down completely randomly.

Pair Corralation between NMI Holdings and Omeros

Assuming the 90 days horizon NMI Holdings is expected to generate 6.54 times less return on investment than Omeros. But when comparing it to its historical volatility, NMI Holdings is 4.77 times less risky than Omeros. It trades about 0.1 of its potential returns per unit of risk. Omeros is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  354.00  in Omeros on September 7, 2024 and sell it today you would earn a total of  681.00  from holding Omeros or generate 192.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NMI Holdings  vs.  Omeros

 Performance 
       Timeline  
NMI Holdings 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.
Omeros 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Omeros are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Omeros reported solid returns over the last few months and may actually be approaching a breakup point.

NMI Holdings and Omeros Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NMI Holdings and Omeros

The main advantage of trading using opposite NMI Holdings and Omeros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Omeros 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 Omeros will offset losses from the drop in Omeros' long position.
The idea behind NMI Holdings and Omeros 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.
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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