Correlation Between NMI Holdings and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Scandinavian Tobacco 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 Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Scandinavian Tobacco Group, you can compare the effects of market volatilities on NMI Holdings and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Scandinavian Tobacco.
Diversification Opportunities for NMI Holdings and Scandinavian Tobacco
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between NMI and Scandinavian is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of NMI Holdings i.e., NMI Holdings and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between NMI Holdings and Scandinavian Tobacco
Assuming the 90 days horizon NMI Holdings is expected to generate 2.63 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, NMI Holdings is 3.63 times less risky than Scandinavian Tobacco. It trades about 0.08 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 427.00 in Scandinavian Tobacco Group on September 1, 2024 and sell it today you would earn a total of 865.00 from holding Scandinavian Tobacco Group or generate 202.58% 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. Scandinavian Tobacco Group
Performance |
| Timeline |
| NMI Holdings |
| Scandinavian Tobacco |
NMI Holdings and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Scandinavian Tobacco
The main advantage of trading using opposite NMI Holdings and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
| Scandinavian Tobacco vs. Darden Restaurants | Scandinavian Tobacco vs. Hanison Construction Holdings | Scandinavian Tobacco vs. NorAm Drilling AS | Scandinavian Tobacco vs. BORR DRILLING NEW |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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