Correlation Between NMI Holdings and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Illinois Tool 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 Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Illinois Tool Works, you can compare the effects of market volatilities on NMI Holdings and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Illinois Tool.
Diversification Opportunities for NMI Holdings and Illinois Tool
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NMI and Illinois is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of NMI Holdings i.e., NMI Holdings and Illinois Tool go up and down completely randomly.
Pair Corralation between NMI Holdings and Illinois Tool
Assuming the 90 days horizon NMI Holdings is expected to generate 5.51 times less return on investment than Illinois Tool. In addition to that, NMI Holdings is 1.65 times more volatile than Illinois Tool Works. It trades about 0.03 of its total potential returns per unit of risk. Illinois Tool Works is currently generating about 0.26 per unit of volatility. If you would invest 22,187 in Illinois Tool Works on August 29, 2024 and sell it today you would earn a total of 4,143 from holding Illinois Tool Works or generate 18.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
NMI Holdings vs. Illinois Tool Works
Performance |
| Timeline |
| NMI Holdings |
| Illinois Tool Works |
NMI Holdings and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Illinois Tool
The main advantage of trading using opposite NMI Holdings and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| NMI Holdings vs. Boyd Gaming | NMI Holdings vs. SEI INVESTMENTS | NMI Holdings vs. HK Electric Investments | NMI Holdings vs. WisdomTree Investments |
| Illinois Tool vs. Scandinavian Tobacco Group | Illinois Tool vs. Platinum Investment Management | Illinois Tool vs. Verizon Communications | Illinois Tool vs. Rogers Communications |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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