Correlation Between NMI Holdings and Align Technology
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Align Technology 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 Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Align Technology, you can compare the effects of market volatilities on NMI Holdings and Align Technology 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 Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Align Technology.
Diversification Opportunities for NMI Holdings and Align Technology
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NMI and Align is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of NMI Holdings i.e., NMI Holdings and Align Technology go up and down completely randomly.
Pair Corralation between NMI Holdings and Align Technology
Assuming the 90 days horizon NMI Holdings is expected to generate 3.53 times less return on investment than Align Technology. In addition to that, NMI Holdings is 1.25 times more volatile than Align Technology. It trades about 0.04 of its total potential returns per unit of risk. Align Technology is currently generating about 0.19 per unit of volatility. If you would invest 20,020 in Align Technology on August 29, 2024 and sell it today you would earn a total of 1,560 from holding Align Technology or generate 7.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Align Technology
Performance |
| Timeline |
| NMI Holdings |
| Align Technology |
NMI Holdings and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Align Technology
The main advantage of trading using opposite NMI Holdings and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.| NMI Holdings vs. CSSC Offshore Marine | NMI Holdings vs. SIEM OFFSHORE NEW | NMI Holdings vs. PARKEN Sport Entertainment | NMI Holdings vs. SK TELECOM TDADR |
| Align Technology vs. Superior Plus Corp | Align Technology vs. NMI Holdings | Align Technology vs. Origin Agritech | Align Technology vs. SIVERS SEMICONDUCTORS AB |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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