Correlation Between NMI Holdings and Merck
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Merck Company, you can compare the effects of market volatilities on NMI Holdings and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Merck.
Diversification Opportunities for NMI Holdings and Merck
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NMI and Merck is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of NMI Holdings i.e., NMI Holdings and Merck go up and down completely randomly.
Pair Corralation between NMI Holdings and Merck
Assuming the 90 days horizon NMI Holdings is expected to generate 0.99 times more return on investment than Merck. However, NMI Holdings is 1.01 times less risky than Merck. It trades about 0.09 of its potential returns per unit of risk. Merck Company is currently generating about 0.01 per unit of risk. If you would invest 2,620 in NMI Holdings on September 14, 2024 and sell it today you would earn a total of 980.00 from holding NMI Holdings or generate 37.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Merck Company
Performance |
| Timeline |
| NMI Holdings |
| Merck Company |
NMI Holdings and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Merck
The main advantage of trading using opposite NMI Holdings and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| NMI Holdings vs. Computershare Limited | NMI Holdings vs. Computer And Technologies | NMI Holdings vs. Live Nation Entertainment | NMI Holdings vs. XLMedia PLC |
| Merck vs. WillScot Mobile Mini | Merck vs. ALGOMA STEEL GROUP | Merck vs. GFL ENVIRONM | Merck vs. Highlight Communications AG |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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