Correlation Between NMI Holdings and Toyota
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Toyota 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 Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Toyota Motor, you can compare the effects of market volatilities on NMI Holdings and Toyota 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 Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Toyota.
Diversification Opportunities for NMI Holdings and Toyota
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between NMI and Toyota is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of NMI Holdings i.e., NMI Holdings and Toyota go up and down completely randomly.
Pair Corralation between NMI Holdings and Toyota
Assuming the 90 days horizon NMI Holdings is expected to generate 1.96 times less return on investment than Toyota. But when comparing it to its historical volatility, NMI Holdings is 1.55 times less risky than Toyota. It trades about 0.04 of its potential returns per unit of risk. Toyota Motor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 15,458 in Toyota Motor on September 12, 2024 and sell it today you would earn a total of 1,142 from holding Toyota Motor or generate 7.39% 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. Toyota Motor
Performance |
| Timeline |
| NMI Holdings |
| Toyota Motor |
NMI Holdings and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and Toyota
The main advantage of trading using opposite NMI Holdings and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| NMI Holdings vs. Nufarm Limited | NMI Holdings vs. AVITA Medical | NMI Holdings vs. Sterling Construction | NMI Holdings vs. Avanos Medical |
| Toyota vs. BYD Company Limited | Toyota vs. MERCEDES BENZ GRP ADR14 | Toyota vs. Superior Plus Corp | Toyota 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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