Correlation Between NMI Holdings and Federal Home
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Federal Home Loan, you can compare the effects of market volatilities on NMI Holdings and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Federal Home.
Diversification Opportunities for NMI Holdings and Federal Home
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NMI and Federal is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of NMI Holdings i.e., NMI Holdings and Federal Home go up and down completely randomly.
Pair Corralation between NMI Holdings and Federal Home
Assuming the 90 days horizon NMI Holdings is expected to under-perform the Federal Home. But the stock apears to be less risky and, when comparing its historical volatility, NMI Holdings is 4.53 times less risky than Federal Home. The stock trades about -0.05 of its potential returns per unit of risk. The Federal Home Loan is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 131.00 in Federal Home Loan on August 25, 2024 and sell it today you would earn a total of 151.00 from holding Federal Home Loan or generate 115.27% 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. Federal Home Loan
Performance |
| Timeline |
| NMI Holdings |
| Federal Home Loan |
NMI Holdings and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Federal Home
The main advantage of trading using opposite NMI Holdings and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| NMI Holdings vs. Lion One Metals | NMI Holdings vs. Harmony Gold Mining | NMI Holdings vs. OFFICE DEPOT | NMI Holdings vs. JAPAN TOBACCO UNSPADR12 |
| Federal Home vs. Superior Plus Corp | Federal Home vs. NMI Holdings | Federal Home vs. Origin Agritech | Federal Home 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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