Correlation Between NMI Holdings and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Telefonaktiebolaget 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 Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on NMI Holdings and Telefonaktiebolaget 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 Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Telefonaktiebolaget.
Diversification Opportunities for NMI Holdings and Telefonaktiebolaget
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NMI and Telefonaktiebolaget is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of NMI Holdings i.e., NMI Holdings and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between NMI Holdings and Telefonaktiebolaget
Assuming the 90 days horizon NMI Holdings is expected to generate 1.23 times less return on investment than Telefonaktiebolaget. But when comparing it to its historical volatility, NMI Holdings is 1.33 times less risky than Telefonaktiebolaget. It trades about 0.09 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 461.00 in Telefonaktiebolaget LM Ericsson on August 31, 2024 and sell it today you would earn a total of 304.00 from holding Telefonaktiebolaget LM Ericsson or generate 65.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Telefonaktiebolaget LM Ericsso
Performance |
| Timeline |
| NMI Holdings |
| Telefonaktiebolaget |
NMI Holdings and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Telefonaktiebolaget
The main advantage of trading using opposite NMI Holdings and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Telefonaktiebolaget 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 Telefonaktiebolaget will offset losses from the drop in Telefonaktiebolaget's long position.| NMI Holdings vs. Iridium Communications | NMI Holdings vs. BOS BETTER ONLINE | NMI Holdings vs. Verizon Communications | NMI Holdings vs. Singapore Telecommunications Limited |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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