Correlation Between NMI Holdings and Enel SpA
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Enel SpA 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 Enel SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Enel SpA, you can compare the effects of market volatilities on NMI Holdings and Enel SpA 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 Enel SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Enel SpA.
Diversification Opportunities for NMI Holdings and Enel SpA
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NMI and Enel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA 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 Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of NMI Holdings i.e., NMI Holdings and Enel SpA go up and down completely randomly.
Pair Corralation between NMI Holdings and Enel SpA
Assuming the 90 days horizon NMI Holdings is expected to generate 2.01 times more return on investment than Enel SpA. However, NMI Holdings is 2.01 times more volatile than Enel SpA. It trades about 0.11 of its potential returns per unit of risk. Enel SpA is currently generating about -0.08 per unit of risk. If you would invest 3,580 in NMI Holdings on September 1, 2024 and sell it today you would earn a total of 200.00 from holding NMI Holdings or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NMI Holdings vs. Enel SpA
Performance |
| Timeline |
| NMI Holdings |
| Enel SpA |
NMI Holdings and Enel SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Enel SpA
The main advantage of trading using opposite NMI Holdings and Enel SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Enel SpA 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 Enel SpA will offset losses from the drop in Enel SpA's long position.| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
| Enel SpA vs. Hyatt Hotels | Enel SpA vs. Applied Materials | Enel SpA vs. Hyster Yale Materials Handling | Enel SpA vs. Dalata Hotel Group |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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