Correlation Between NMI Holdings and CSL
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and CSL 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 CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and CSL LTD SPONADR, you can compare the effects of market volatilities on NMI Holdings and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and CSL.
Diversification Opportunities for NMI Holdings and CSL
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NMI and CSL is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of NMI Holdings i.e., NMI Holdings and CSL go up and down completely randomly.
Pair Corralation between NMI Holdings and CSL
Assuming the 90 days horizon NMI Holdings is expected to generate 1.18 times more return on investment than CSL. However, NMI Holdings is 1.18 times more volatile than CSL LTD SPONADR. It trades about 0.02 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about -0.07 per unit of risk. If you would invest 3,700 in NMI Holdings on September 2, 2024 and sell it today you would earn a total of 60.00 from holding NMI Holdings or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. CSL LTD SPONADR
Performance |
| Timeline |
| NMI Holdings |
| CSL LTD SPONADR |
NMI Holdings and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and CSL
The main advantage of trading using opposite NMI Holdings and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| NMI Holdings vs. Taylor Morrison Home | NMI Holdings vs. ATRYS HEALTH SA | NMI Holdings vs. National Health Investors | NMI Holdings vs. Bumrungrad Hospital Public |
| CSL vs. Taiwan Semiconductor Manufacturing | CSL vs. DICKER DATA LTD | CSL vs. INFORMATION SVC GRP | CSL vs. Public Storage |
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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