Correlation Between NMI Holdings and Santander Bank
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Santander Bank 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 Santander Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Santander Bank Polska, you can compare the effects of market volatilities on NMI Holdings and Santander Bank 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 Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Santander Bank.
Diversification Opportunities for NMI Holdings and Santander Bank
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NMI and Santander is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska 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 Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of NMI Holdings i.e., NMI Holdings and Santander Bank go up and down completely randomly.
Pair Corralation between NMI Holdings and Santander Bank
Assuming the 90 days horizon NMI Holdings is expected to generate 1.77 times less return on investment than Santander Bank. But when comparing it to its historical volatility, NMI Holdings is 2.71 times less risky than Santander Bank. It trades about 0.1 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,043 in Santander Bank Polska on August 26, 2024 and sell it today you would earn a total of 4,207 from holding Santander Bank Polska or generate 69.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Santander Bank Polska
Performance |
| Timeline |
| NMI Holdings |
| Santander Bank Polska |
NMI Holdings and Santander Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Santander Bank
The main advantage of trading using opposite NMI Holdings and Santander Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Santander Bank 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 Santander Bank will offset losses from the drop in Santander Bank's long position.| NMI Holdings vs. USWE SPORTS AB | NMI Holdings vs. GungHo Online Entertainment | NMI Holdings vs. Ming Le Sports | NMI Holdings vs. DICKS Sporting Goods |
| Santander Bank vs. Superior Plus Corp | Santander Bank vs. NMI Holdings | Santander Bank vs. Origin Agritech | Santander Bank 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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