Correlation Between NMI Holdings and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Burlington Stores 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 Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Burlington Stores, you can compare the effects of market volatilities on NMI Holdings and Burlington Stores 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 Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Burlington Stores.
Diversification Opportunities for NMI Holdings and Burlington Stores
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NMI and Burlington is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores 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 Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of NMI Holdings i.e., NMI Holdings and Burlington Stores go up and down completely randomly.
Pair Corralation between NMI Holdings and Burlington Stores
Assuming the 90 days horizon NMI Holdings is expected to generate 1.38 times less return on investment than Burlington Stores. But when comparing it to its historical volatility, NMI Holdings is 1.49 times less risky than Burlington Stores. It trades about 0.11 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 16,300 in Burlington Stores on September 4, 2024 and sell it today you would earn a total of 10,300 from holding Burlington Stores or generate 63.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
NMI Holdings vs. Burlington Stores
Performance |
| Timeline |
| NMI Holdings |
| Burlington Stores |
NMI Holdings and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Burlington Stores
The main advantage of trading using opposite NMI Holdings and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Burlington Stores 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 Burlington Stores will offset losses from the drop in Burlington Stores' long position.| NMI Holdings vs. HYDROFARM HLD GRP | NMI Holdings vs. VIAPLAY GROUP AB | NMI Holdings vs. Titan Machinery | NMI Holdings vs. SCANSOURCE |
| Burlington Stores vs. WIMFARM SA EO | Burlington Stores vs. Nufarm Limited | Burlington Stores vs. Hanison Construction Holdings | Burlington Stores vs. HYDROFARM HLD GRP |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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