Correlation Between NMI Holdings and GEO
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and GEO 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 GEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and The GEO Group, you can compare the effects of market volatilities on NMI Holdings and GEO 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 GEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and GEO.
Diversification Opportunities for NMI Holdings and GEO
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NMI and GEO is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group 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 GEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEO Group has no effect on the direction of NMI Holdings i.e., NMI Holdings and GEO go up and down completely randomly.
Pair Corralation between NMI Holdings and GEO
Assuming the 90 days horizon NMI Holdings is expected to generate 1.81 times less return on investment than GEO. But when comparing it to its historical volatility, NMI Holdings is 2.2 times less risky than GEO. It trades about 0.08 of its potential returns per unit of risk. The GEO Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,122 in The GEO Group on September 1, 2024 and sell it today you would earn a total of 1,534 from holding The GEO Group or generate 136.72% 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. The GEO Group
Performance |
| Timeline |
| NMI Holdings |
| GEO Group |
NMI Holdings and GEO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and GEO
The main advantage of trading using opposite NMI Holdings and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, GEO 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 GEO will offset losses from the drop in GEO's long position.| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
| GEO vs. Hochschild Mining plc | GEO vs. FRACTAL GAMING GROUP | GEO vs. Scientific Games | GEO vs. VULCAN MATERIALS |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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