Correlation Between NMI Holdings and AIR CHINA
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and AIR CHINA 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 AIR CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and AIR CHINA LTD, you can compare the effects of market volatilities on NMI Holdings and AIR CHINA 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 AIR CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and AIR CHINA.
Diversification Opportunities for NMI Holdings and AIR CHINA
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NMI and AIR is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and AIR CHINA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR CHINA LTD 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 AIR CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR CHINA LTD has no effect on the direction of NMI Holdings i.e., NMI Holdings and AIR CHINA go up and down completely randomly.
Pair Corralation between NMI Holdings and AIR CHINA
Assuming the 90 days horizon NMI Holdings is expected to generate 3.37 times less return on investment than AIR CHINA. But when comparing it to its historical volatility, NMI Holdings is 1.0 times less risky than AIR CHINA. It trades about 0.13 of its potential returns per unit of risk. AIR CHINA LTD is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 960.00 in AIR CHINA LTD on August 31, 2024 and sell it today you would earn a total of 230.00 from holding AIR CHINA LTD or generate 23.96% 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. AIR CHINA LTD
Performance |
| Timeline |
| NMI Holdings |
| AIR CHINA LTD |
NMI Holdings and AIR CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and AIR CHINA
The main advantage of trading using opposite NMI Holdings and AIR CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, AIR CHINA 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 AIR CHINA will offset losses from the drop in AIR CHINA'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 |
| AIR CHINA vs. RYANAIR HLDGS ADR | AIR CHINA vs. Southwest Airlines Co | AIR CHINA vs. Superior Plus Corp | AIR CHINA vs. NMI Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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