Correlation Between NMI Holdings and Canadian National
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Canadian National 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 Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Canadian National Railway, you can compare the effects of market volatilities on NMI Holdings and Canadian National 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 Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Canadian National.
Diversification Opportunities for NMI Holdings and Canadian National
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NMI and Canadian is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of NMI Holdings i.e., NMI Holdings and Canadian National go up and down completely randomly.
Pair Corralation between NMI Holdings and Canadian National
Assuming the 90 days horizon NMI Holdings is expected to generate 1.35 times more return on investment than Canadian National. However, NMI Holdings is 1.35 times more volatile than Canadian National Railway. It trades about 0.09 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.01 per unit of risk. If you would invest 1,900 in NMI Holdings on September 3, 2024 and sell it today you would earn a total of 1,860 from holding NMI Holdings or generate 97.89% 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. Canadian National Railway
Performance |
| Timeline |
| NMI Holdings |
| Canadian National Railway |
NMI Holdings and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Canadian National
The main advantage of trading using opposite NMI Holdings and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| NMI Holdings vs. Harmony Gold Mining | NMI Holdings vs. WT OFFSHORE | NMI Holdings vs. Luckin Coffee | NMI Holdings vs. BJs Restaurants |
| Canadian National vs. Superior Plus Corp | Canadian National vs. NMI Holdings | Canadian National vs. Origin Agritech | Canadian National 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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