Correlation Between NMI Holdings and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Iridium Communications, you can compare the effects of market volatilities on NMI Holdings and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Iridium Communications.
Diversification Opportunities for NMI Holdings and Iridium Communications
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between NMI and Iridium is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of NMI Holdings i.e., NMI Holdings and Iridium Communications go up and down completely randomly.
Pair Corralation between NMI Holdings and Iridium Communications
Assuming the 90 days horizon NMI Holdings is expected to generate 0.56 times more return on investment than Iridium Communications. However, NMI Holdings is 1.79 times less risky than Iridium Communications. It trades about 0.11 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.03 per unit of risk. If you would invest 2,540 in NMI Holdings on September 2, 2024 and sell it today you would earn a total of 1,220 from holding NMI Holdings or generate 48.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Iridium Communications
Performance |
| Timeline |
| NMI Holdings |
| Iridium Communications |
NMI Holdings and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Iridium Communications
The main advantage of trading using opposite NMI Holdings and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| NMI Holdings vs. Taylor Morrison Home | NMI Holdings vs. ATRYS HEALTH SA | NMI Holdings vs. National Health Investors | NMI Holdings vs. Bumrungrad Hospital Public |
| Iridium Communications vs. QURATE RETAIL INC | Iridium Communications vs. Taiwan Semiconductor Manufacturing | Iridium Communications vs. BRIT AMER TOBACCO | Iridium Communications vs. MARKET VECTR RETAIL |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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