Correlation Between NMI Holdings and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Sumitomo Chemical, you can compare the effects of market volatilities on NMI Holdings and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Sumitomo Chemical.
Diversification Opportunities for NMI Holdings and Sumitomo Chemical
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NMI and Sumitomo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of NMI Holdings i.e., NMI Holdings and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between NMI Holdings and Sumitomo Chemical
Assuming the 90 days horizon NMI Holdings is expected to generate 1.3 times less return on investment than Sumitomo Chemical. But when comparing it to its historical volatility, NMI Holdings is 1.98 times less risky than Sumitomo Chemical. It trades about 0.09 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 182.00 in Sumitomo Chemical on August 25, 2024 and sell it today you would earn a total of 34.00 from holding Sumitomo Chemical or generate 18.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NMI Holdings vs. Sumitomo Chemical
Performance |
| Timeline |
| NMI Holdings |
| Sumitomo Chemical |
NMI Holdings and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Sumitomo Chemical
The main advantage of trading using opposite NMI Holdings and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical'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 |
| Sumitomo Chemical vs. Sociedad Qumica y | Sumitomo Chemical vs. Superior Plus Corp | Sumitomo Chemical vs. NMI Holdings | Sumitomo Chemical vs. Origin Agritech |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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