Correlation Between NMI Holdings and Automatic Data
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Automatic Data Processing, you can compare the effects of market volatilities on NMI Holdings and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Automatic Data.
Diversification Opportunities for NMI Holdings and Automatic Data
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between NMI and Automatic is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of NMI Holdings i.e., NMI Holdings and Automatic Data go up and down completely randomly.
Pair Corralation between NMI Holdings and Automatic Data
Assuming the 90 days horizon NMI Holdings is expected to generate 1.19 times less return on investment than Automatic Data. In addition to that, NMI Holdings is 1.39 times more volatile than Automatic Data Processing. It trades about 0.11 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.18 per unit of volatility. If you would invest 22,351 in Automatic Data Processing on September 3, 2024 and sell it today you would earn a total of 6,759 from holding Automatic Data Processing or generate 30.24% 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. Automatic Data Processing
Performance |
| Timeline |
| NMI Holdings |
| Automatic Data Processing |
NMI Holdings and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Automatic Data
The main advantage of trading using opposite NMI Holdings and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| NMI Holdings vs. Harmony Gold Mining | NMI Holdings vs. WT OFFSHORE | NMI Holdings vs. Luckin Coffee | NMI Holdings vs. BJs Restaurants |
| Automatic Data vs. DFS Furniture PLC | Automatic Data vs. KOOL2PLAY SA ZY | Automatic Data vs. ITALIAN WINE BRANDS | Automatic Data vs. ePlay Digital |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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