Correlation Between NMI Holdings and Contact Energy
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Contact Energy 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 Contact Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Contact Energy Limited, you can compare the effects of market volatilities on NMI Holdings and Contact Energy 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 Contact Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Contact Energy.
Diversification Opportunities for NMI Holdings and Contact Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NMI and Contact is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Contact Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Energy 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 Contact Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Energy has no effect on the direction of NMI Holdings i.e., NMI Holdings and Contact Energy go up and down completely randomly.
Pair Corralation between NMI Holdings and Contact Energy
Assuming the 90 days horizon NMI Holdings is expected to generate 2.37 times more return on investment than Contact Energy. However, NMI Holdings is 2.37 times more volatile than Contact Energy Limited. It trades about 0.27 of its potential returns per unit of risk. Contact Energy Limited is currently generating about 0.41 per unit of risk. If you would invest 3,360 in NMI Holdings on September 4, 2024 and sell it today you would earn a total of 400.00 from holding NMI Holdings or generate 11.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
NMI Holdings vs. Contact Energy Limited
Performance |
| Timeline |
| NMI Holdings |
| Contact Energy |
NMI Holdings and Contact Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Contact Energy
The main advantage of trading using opposite NMI Holdings and Contact Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Contact Energy 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 Contact Energy will offset losses from the drop in Contact Energy's long position.| NMI Holdings vs. HYDROFARM HLD GRP | NMI Holdings vs. VIAPLAY GROUP AB | NMI Holdings vs. Titan Machinery | NMI Holdings vs. SCANSOURCE |
| Contact Energy vs. CENTRICA ADR NEW | Contact Energy vs. Superior Plus Corp | Contact Energy vs. NMI Holdings | Contact Energy vs. Origin Agritech |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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