Correlation Between NMI Holdings and TransAlta
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and TransAlta 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 TransAlta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and TransAlta, you can compare the effects of market volatilities on NMI Holdings and TransAlta 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 TransAlta. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and TransAlta.
Diversification Opportunities for NMI Holdings and TransAlta
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between NMI and TransAlta is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta 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 TransAlta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta has no effect on the direction of NMI Holdings i.e., NMI Holdings and TransAlta go up and down completely randomly.
Pair Corralation between NMI Holdings and TransAlta
Assuming the 90 days horizon NMI Holdings is expected to generate 1.8 times less return on investment than TransAlta. But when comparing it to its historical volatility, NMI Holdings is 1.21 times less risky than TransAlta. It trades about 0.11 of its potential returns per unit of risk. TransAlta is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 942.00 in TransAlta on September 1, 2024 and sell it today you would earn a total of 104.00 from holding TransAlta or generate 11.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
NMI Holdings vs. TransAlta
Performance |
| Timeline |
| NMI Holdings |
| TransAlta |
NMI Holdings and TransAlta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and TransAlta
The main advantage of trading using opposite NMI Holdings and TransAlta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, TransAlta 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 TransAlta will offset losses from the drop in TransAlta's long position.| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
| TransAlta vs. Perseus Mining Limited | TransAlta vs. MCEWEN MINING INC | TransAlta vs. Grupo Carso SAB | TransAlta vs. Commercial Vehicle Group |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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