Correlation Between NMI Holdings and Vale SA
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Vale SA 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 Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Vale SA, you can compare the effects of market volatilities on NMI Holdings and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Vale SA.
Diversification Opportunities for NMI Holdings and Vale SA
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NMI and Vale is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of NMI Holdings i.e., NMI Holdings and Vale SA go up and down completely randomly.
Pair Corralation between NMI Holdings and Vale SA
Assuming the 90 days horizon NMI Holdings is expected to generate 1.07 times more return on investment than Vale SA. However, NMI Holdings is 1.07 times more volatile than Vale SA. It trades about 0.05 of its potential returns per unit of risk. Vale SA is currently generating about -0.07 per unit of risk. If you would invest 3,580 in NMI Holdings on August 28, 2024 and sell it today you would earn a total of 60.00 from holding NMI Holdings or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Vale SA
Performance |
| Timeline |
| NMI Holdings |
| Vale SA |
NMI Holdings and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Vale SA
The main advantage of trading using opposite NMI Holdings and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| NMI Holdings vs. Lion Biotechnologies | NMI Holdings vs. Digilife Technologies Limited | NMI Holdings vs. Food Life Companies | NMI Holdings vs. CONAGRA FOODS |
| Vale SA vs. Superior Plus Corp | Vale SA vs. NMI Holdings | Vale SA vs. Origin Agritech | Vale SA 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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