Correlation Between NMI Holdings and British American
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and British American Tobacco, you can compare the effects of market volatilities on NMI Holdings and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and British American.
Diversification Opportunities for NMI Holdings and British American
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between NMI and British is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of NMI Holdings i.e., NMI Holdings and British American go up and down completely randomly.
Pair Corralation between NMI Holdings and British American
Assuming the 90 days horizon NMI Holdings is expected to generate 1.85 times less return on investment than British American. In addition to that, NMI Holdings is 2.82 times more volatile than British American Tobacco. It trades about 0.1 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.55 per unit of volatility. If you would invest 3,221 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 360.00 from holding British American Tobacco or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
NMI Holdings vs. British American Tobacco
Performance |
| Timeline |
| NMI Holdings |
| British American Tobacco |
NMI Holdings and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and British American
The main advantage of trading using opposite NMI Holdings and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
| British American vs. SERI INDUSTRIAL EO | British American vs. SALESFORCE INC CDR | British American vs. Perseus Mining Limited | British American vs. Evolution Mining Limited |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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